Tag: older people

• 29 million workers receive largest ever cut to National Insurance
• Government is sticking to its economic plan and rewarding hard work in this month’s pay packet, with over £900 a year boost for typical worker
• Signals government’s long-term ambition to end unfair double tax on work

29 million workers will see their hard work rewarded from tomorrow (6 April), as record tax cuts come into full force.

Since Autumn 2023, National Insurance Contributions (NICs) for workers have been slashed by a third – the largest cut to NICs in history – with a longer-term ambition to end the unfair double tax on work and abolish employee and self-employed NICs altogether.

Since January, 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.

Over 2 million self-employed people will benefit from the main rate of Class 4 NICs being cut from 9% to 6% alongside the abolition of the requirement to pay Class 2 NICs – simplifying the tax system and saving an average self-employed person on £28,000 over £650 a year.

These cuts are possible because the economy is turning a corner, thanks to the government’s decisive action to bring inflation down from 11.1% to 3.4% and ensure borrowing costs start to fall. Because of this progress, the government can now cut taxes to reward work and grow the economy.

The tax cuts – worth £20 billion a year – mean that those individuals on average salaries will now pay less in personal taxes than they would in any other G7 country.

Prime Minister Rishi Sunak said: “Hard work is one of my core values, and the progress we have made on the economy means we can reward work with a tax cut worth £900 for the average earner.

“This marks the next step in our plan to end the unfairness of double taxation of work by abolishing National Insurance in the long term.”

Chancellor of the Exchequer, Jeremy Hunt, said: “The record tax cuts taking effect tomorrow show our economic plan is working – because of the progress we’ve made we’re putting hundreds of pounds a year back into the pockets of working people across the country.

“It shows we stand behind those who work hard and fires the starting gun on our long-term ambition to end the unfair double tax on work.”

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 has launched an updated online tool to help people understand how much they personally could save in National Insurance this year. 

They come into effect on the same day as an increase to the income threshold at which the High Income Child Benefit Charge (HICBC) starts – from £50,000 to £60,000 – taking 170,000 families out of paying the charge altogether.

The rate at which the HICBC is charged will also be halved from 1% of the Child Benefit payment for every additional £100 earnt above the threshold, to 1% for every £200, meaning Child Benefit will not be withdrawn in full until individuals earn £80,000 or higher.

As a result of these changes, 485,000 hard-working families will gain an average of £1,260 towards the costs of raising their children in 2024/25.

The government has also committed to consulting in due course on administering the HICBC on a household basis by April 2026, in recognition of how charging on an individual basis can sometimes lead to unfair outcomes, in particular for single parents and single earner families.

These changes to support hard-working families follow a raft of measures that came into force on 1 April that could save households up to £3,850 a year on average 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.

And on Monday 8 April, the government will stand by its commitment to maintain the Triple Lock by raising the full basic State Pension by 8.5% to almost £170 a week, after the largest ever cash increase last year.

Changes like the introduction of the Triple Lock and new State Pension have meant pensioners are on average £1,000 better off than in 2010, according to the Resolution Foundation.