More than two million low-income workers will no longer pay National Insurance now, owing to a change in the way the tax is collected.

Employees can now earn £12,570 a year before paying National Insurance, up from £9,880 a year previously.

Although, in April, the government increased the rate paid – to raise money to fund health and social care.

Taken together, these changes mean workers earning less than about £34,000 a year will pay less.

Analysts said the latest change, which takes effect in pay packets from Wednesday, marks another turn in the “swings and roundabouts” of National Insurance policy.

While helping individuals manage the rising cost of living, any savings could quickly be cancelled out by increasing prices and bills, they said.

Employees across the UK pay National Insurance on their wages, employers pay extra contributions for staff, and the self-employed pay it on their profits.

The first alteration to payments came in April, when employees, businesses and the self-employed started paying an extra 1.25p in the pound.

It meant that, instead of paying National Insurance contributions of 12% on earnings up to £50,270 and 2% on anything above that, employees now pay 13.25% and 3.25% respectively.

The self-employed have seen their equivalent rates go up from 9% and 2%, to 10.25% and 3.25%.

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