The Chancellor of the Exchequer, Sajid Javid, has raised the threshold at which taxpayers start to pay national insurance contributions (NICs) to £9,500 a year.
The change will apply for the 2020/21 tax year beginning this April, and moves the government closer to its target of a £12,500 threshold for NICs, which would bring it into line with income tax.
All other thresholds for 2020/21 will rise with inflation, except for the upper NIC thresholds which will remain frozen at £50,000, as announced in the 2018 Autumn Budget.
According to the government, a typical employee will save around £104 during the next tax year, while self-employed people, who pay a lower rate, will save £78.
Commenting on the change, the Chancellor said: 'We're determined to do what we promised and put more money into the pockets of ordinary hard-working people. That's why we're starting this government as we mean to go on, by cutting their bills.
'We want everyone to feel that they can contribute to the new chapter we are opening for the economy and our country, because under this government work will always pay.'