Tag: National Insurance cut

Cash injection for millions as National Insurance cut hits payslips

  • Millions of workers checking payslips tomorrow will see a tax cut
  • As the economy turns a corner, the government is rewarding hard work, with over £900 a year boost for typical worker
  • Marks another step in long-term ambition to end unfair double tax on work

There are 27 million employees in the UK, and today [Tuesday 30 April] millions of them on monthly salaries will wake up with a little more cash in their pockets, as the UK government’s Spring Budget cut to National Insurance appears in April’s pay-packets.

Since Autumn 2023, National Insurance Contributions (NICs) for workers have been slashed by a third – the largest cut to employee and self-employed NICs in history.

The main rate of employee National Insurance has been cut for 27 million workers from 12% to 8%, saving the average employee on £35,400 over £900 a year. An average full-time nurse will save £1053, a typical junior doctor £1508 and an average teacher £1270.

These cuts are possible because the economy is turning a corner, thanks to the government’s decisive action that has helped bring inflation down from 11.1% to 3.2% and ensure borrowing costs start to fall. Because of this progress, the government can now cut taxes to reward work and grow the economy.

This marks another step towards the longer-term ambition to end the unfair double tax on work and abolish employee and self-employed NICs altogether.

These tax cuts – worth over £20 billion a year – have been achievable while protecting spending including keeping the Triple Lock and the government has commitment to going further only when it’s possible to do so.

Prime Minister Rishi Sunak said: ““At the start of last year I made to pledge to half inflation. And because of the difficult decisions we have taken, inflation has more than halved and we are now able to reward work, and cut taxes for millions of workers who are seeing the benefit in their pay checks today.

“We have now cut National Insurance by £900 because it’s unfair that workers pay double tax on their income. We need to make it much simpler and much fairer and we are going to continue cutting this tax until it’s gone – while continuing to protect pensioners with the triple lock and providing record levels of funding to the NHS.”

Chancellor of the Exchequer Jeremy Hunt said: “We’re on the right track – we’ve been able to slash National Insurance to return hundreds of pounds back into the pockets of hard-working Brits because of the decisions we’ve made to manage the economy responsibly.

“Over the years ahead we want to get rid of National Insurance completely for workers – it is an unfair double tax on work and we’ve shown we can protect spending on public services while eliminating it.”

The tax cuts to date mean that for single individuals on average salaries, personal taxes would be lower in the UK than every other G7 country, based on the most recent OECD data.

The smart nature of the tax cuts will also help grow the economy by bringing more people into the labour market. The Office for Budget Responsibility (OBR) expects that, as a result of these combined cuts, total hours worked will increase by the equivalent of almost 200,000 full-time workers by 2028-29.

To mark the record cuts to NICs, HMRC launched an updated online tool earlier this month to help people understand how much they personally could save in National Insurance this year.

These cuts to reward work follow a raft of changes that came into force on 1 April and could save households up to £3,850 a year to help those struggling with cost-of-living while igniting the economy.

This includes a record increase in the National Living Wage from £10.42 an hour to £11.44, and a 12.3% drop in energy bills from the previous quarter.

In addition, households can benefit from a separate increase to the Local Housing Allowance that will mean some of the poorest families on either Universal Credit or Housing Benefit will gain £800 a year on average.

Who does this help?

The combined cuts to National Insurance mean:

  • A ‘hard-working’ family with two earners on the average salary of £35,400 each will be better off by £1,826.
  • An average full-time nurse on £38,900 will be better off by £1,053.
  • A senior nurse with five years experience on £42,618 will be better off by £1,202.
  • The average police officer on £44,300 will be better off by £1,270.
  • A cleaner working night shifts on £21,058 will be better off by £340.
  • A typical junior doctor on £65,000 will be better off by £1,508.
  • A typical self-employed plumber on £34,361 will be better off by £846.
  • The typical teacher on £44,300 will be better off by over £1,270.

£1000 National Insurance cut boosts Britain’s paychecks

  • Millions of UK workers see boost in take home pay today as cut to National Insurance shows in January’s payslip as part of plan to reward work and boost growth
  • Progress made on economy means government is able to cut taxes for hard working people
  • Saving worth £450 for an average worker earning £35,400 a year

Millions of workers are going to start seeing a boost to their take home pay today as January’s pay comes into bank accounts across the UK.

With millions of monthly earners getting paid today [Wednesday 31 January 2024], a household with two average earners will be starting to see a nearly £1,000 a year benefit from the Chancellor’s record personal tax cut.

Thanks to the progress made against its economic priorities, the government announced it will cut National Insurance by 2p from 12% to 10% at the Autumn Statement and made sure it took effect within weeks of the announcement, as part of its plan to reward work and grow the economy. The change is a more than 15% reduction in National Insurance, saving £450 this year for the average salaried worker on £35,400.

Millions of people working different jobs across hundreds of industries will now be better off. To a pub landlord that’s £418 a year, a bus driver £328, a nurse £527. A teacher will pay £635 less in National Insurance contributions this year.

Today’s historic NICs cut takes effect with the government having faced the legacy of Covid-19, and global instability with war in Ukraine and the Middle East.

In the past year, inflation has halved; the economy has recovered more quickly from the pandemic than first thought; and debt is on track to fall. The government is sticking to the plan and is building a stronger economy where hard work is rewarded and ambition and aspiration are celebrated.

Chancellor of the Exchequer Jeremy Hunt said: “I never shied away from making the tough decisions needed yesterday to cut taxes today.

“This January pay boost for hard-working Brits is part of our plan to grow the economy and build a brighter future where hard work is always rewarded, relieving pressure on UK workers by putting around £450 back in their pockets.”

The cut means that for those on average salaries, personal taxes would be lower in the UK for single parents with no children than every other G7 country, based on the most recent OECD data. The UK also has the most generous starting allowances for income tax and social security contributions in the G7.

To mark the tax cut, earlier this month HMRC launched an online tool to help people understand how much they could save in National Insurance this year. 

The tool uses salary information to give employees personalised estimates of how much they could save because of the government’s changes, and is hosted on the government’s cost of living support website on gov.uk.

The last major cut to the current personal tax system of today’s magnitude was when the National Insurance personal allowance increased from £9,880 to £12,570. This was the largest ever cut to a personal tax starting threshold, allowing working people to hold on to an extra £2,690 free from tax whilst last year taking around 2.2 million people out of paying tax altogether.

The cut to National Insurance combined with above-inflation increases to tax thresholds since 2010 means that the average earner will pay over £1,000 less in personal taxes than they otherwise would have done.

The independent OBR says that, by 2028-29 this tax cut will increase the number of people in employment by 28,000 alongside a substantial economic benefit from those in work increasing their hours which the OBR forecast will be equivalent to 79,000 on a full-time equivalent basis. Overall, the OBR says that by 2028-29 this measure will increase the number of hours worked by new and existing employees by 0.3%, or 94,000 in full-time equivalent terms.

At the Autumn Statement the Chancellor Jeremy Hunt announced the biggest package of tax cuts to be implemented since the 1980s. In addition to today’s action, he announced a National Insurance cut for 2 million self-employed people, which will take effect on 6 April 2024 and is worth £350 for the average self-employed person on £28,200.

He also made full expensing permanent, which at £11 billion per year is the biggest business tax cut in modern British history helping businesses invest for less. Over 200 business leaders told the government that it would have the single most transformational impact on business investment and growth.

The OBR says these two measures will increase the number of people in work and grow the economy.

He also announced the biggest ever increase to the National Living Wage, froze alcohol duty for six months and extended cuts to business rates relief for the high street.

Record National Insurance cut arrives in less than six weeks

  • 27 million employees to receive largest ever cut to National Insurance on 6 January 2024
  • On Thursday, the House of Commons debated the National Insurance Contributions (Reduction in Rates) Bill, with the average employee and self-employed set to get an extra £450 a year and £350 a year
  • £9 billion a year tax cut means that personal taxes on the average salary are set to be lower in the UK than every other major economy.

The National Insurance Contributions (Reduction in Rates) Bill will be debated in the Commons today to implement the largest ever cut to National Insurance from 6 January 2024 – less than six weeks’ time.

The Bill will be debated throughout the day with Members voting on the Bill this evening. It will then go to the Lords in the middle of December before receiving Royal Assent thereafter.

Reducing Class 1 National Insurance from 12 per cent to 10 per cent will reward work, meaning 27 million employees will effectively pay over 15 per cent less on National Insurance.

To the average employee on a salary of £35,400 this will be worth £450 a year, improving living standards and reducing the current combined tax rate of 32% for employees paying the basic rate of tax to 30% – the lowest since the 1980s.

Chancellor of the Exchequer, Jeremy Hunt, said: “I’ve been clear from the start that I want to cut taxes. Now, having met our pledge to halve inflation, taxes can be cut in a responsible way that rewards work and helps grow our economy.”

These changes will mean that, for those on average salaries, personal taxes would be lower in the UK than every other G7 country, based on the most recent OECD data.

Taxes for the self-employed will also be cut and reformed. From 6 April 2024, Class 4 NICs for the self-employed will be reduced from 9% to 8% and no self-employed person will have to pay Class 2 NICs, simplifying the tax system and saving the average self-employed person on £28,200 a year £350 in 2024/25.

The changes will see an average full-time nurse on £38,900 receive an annual gain of over £520; an average teacher on £44,300 would receive an additional £630 a year; and a typical self-employed plumber on £34,400 would be £410 better off as a result of these cuts.

National Insurance cut reaches key milestone

  • Bill to deliver £330 national insurance contributions cut announced by the Chancellor at the Spring Statement gets Royal Assent
  • Change means threshold at which individuals start to pay NICs will rise by almost £3,000 and align with the income tax personal allowance from July
  • 70% of workers who pay NICs will pay less, even after accounting for the introduction of the Health and Social Care Levy

The UK government’s measures to tackle the cost-of-living crisis reached a key milestone this week, after a bill to raise NICS thresholds by almost £3,000 and deliver a tax cut worth over £330 for a typical employee in the year from July became law.

The National Insurance Contributions (Increase of Thresholds) Act, which received Royal Assent on Thursday, raises the threshold at which individuals start to pay NICs, aligning it with the income tax personal allowance at £12,570 from July 2022.

Around 2.2m working age people will be taken out of paying Class 1 NICs, applying to employees, and Class 4 NICs, for the self-employed, altogether. From July, around 70% of workers who pay NICs will be better off, even accounting for the introduction of the Health and Social Care Levy.

At the Spring Statement the Chancellor set out a tax plan that will help families with the cost of living, support growth in the economy, and ensure the proceeds of growth are shared fairly. As well as the NICs threshold rise it included a 12-month-long 5p cut to fuel duty and a cut in the basic rate of income tax, to 19p in the pound, taking effect in 2024.

Chancellor of the Exchequer Rishi Sunak said: “I know people are worried about making ends meet, with global supply chain challenges and Russia’s invasion of Ukraine driving up the cost of living for families across the UK.

“That’s why this tax cut for almost 30 million people is so important. And it’s part of further support worth over £22 billion in 2022-23 to help with the cost of living, by helping people with their energy bills and ensuring people keep more of their money.”

Thanks to above inflation increases in the income tax personal allowance and the NICs Primary Threshold since 2010-11, a typical basic rate taxpayer earning £24,000 in 2022-23 will pay £1,140 less in income tax and NICs than they otherwise would have, even after accounting for the Health and Social Care Levy.

That comprises £760 less income tax and around £380 less NICs in 2022-23 compared to what they otherwise would have paid.

The July threshold rise is a tax cut for a typical employee worth over £330 in the year from July 2022; the equivalent saving for a typical self-employed person, who pay lower NICs rates, would be worth over £250.

The UK Government has taken action worth over £22 billion next financial year to help with the cost of living including the fuel duty cut, increases to the NICs thresholds and an extra £500 million for the Household Support Fund to help those most in need.

They say they’re also helping low-income families keep more of what they earn by reducing the Universal Credit taper rate, boosting incomes by £1000 per average full time worker by increasing the National Living Wage and providing over £9 billion to help with rising energy bills.