In a move to ease financial burdens on individuals and businesses, the Government has implemented a historic National Insurance cut, providing relief for 27 million people and resulting in yearly savings of hundreds of pounds per average household.
As of 6 January 2024, the main rate of National Insurance has been reduced by two percentage points, dropping from 12% to 10%. This substantial reduction, exceeding 15%, equates to a £450 saving this year for the average salaried worker earning £35,400.
The impact on households
For a household with two average earners, the annual savings could be worth nearly £1,000, marking a positive impact on the disposable income of families nationwide.
The Government's decision to cut National Insurance reflects a broader strategy to stimulate economic recovery following the pandemic.
Prime Minister Rishi Sunak said:
"We have made tough decisions on the economy, supporting people through global shocks such as the pandemic and Putin's illegal invasion of Ukraine. It is because of the tough decisions this government has taken that today we are able to cut taxes for 27 million people across the UK.
"The tax cuts will directly reward hard-working people, putting £450 back in the pocket of the average worker and helping them make ends meet."
To assist individuals in understanding the implications of the tax cut, HMRC has launched an online tool. This tool, hosted on the Government's cost of living support website, uses salary information to provide personalised estimates of potential National Insurance savings for employees.
Forthcoming tax changes
In addition to this historic tax cut, further measures will apply later this year, including a National Insurance cut for 2m self-employed individuals, set to take effect on 6th April 2024. This move, worth £350 for the average self-employed person on £28,200, is part of the Government's commitment to supporting businesses and households alike.
Before the latest announcement, 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 in July 2022. 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 taking 2.2m people out of paying tax altogether.
These significant reductions in National Insurance contributions reflect the Government's commitment to supporting households and prudent financial management, aimed at reducing the burden of debt for future generations.
Chancellor of the Exchequer, Jeremy Hunt, said:
"With inflation halved, we've turned a corner and are cutting taxes - starting with today's record cut to National Insurance worth nearly £1,000 for a household.
"From nurses and brickies, to cleaners and butchers, 27 million hard-working Brits will have a little more cash in their pockets."
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