In a landmark move, the government has introduced the largest-ever cut to National Insurance Contributions (NICs), benefitting 29 million hardworking individuals across the UK.
Since Autumn 2023, NICs for workers have been reduced by a third, representing a historic milestone in tax reform. The ultimate goal is to eliminate the unfair double taxation on work by phasing out employee and self-employed NICs entirely.
For employees, the main rate of NICs has been slashed from 12% to 8%, resulting in substantial savings for the average worker earning £35,400 – amounting to over £900 annually. Similarly, over 2 million self-employed individuals will benefit from a reduction in Class 4 NICs from 9% to 6%, alongside the abolition of the requirement to pay Class 2 NICs. This simplification of the tax system will save the average self-employed person on £28,000 over £650 per year.
The economic progress achieved, including a significant reduction in inflation and borrowing costs, has enabled the government to implement these tax cuts, totaling £20 billion annually. As a result, individuals on average salaries in the UK will now pay less in personal taxes than in any other G7 country.
Prime Minister Rishi Sunak emphasized the importance of rewarding hard work, stating that the tax cut is a testament to the government's commitment to supporting workers. Chancellor of the Exchequer Jeremy Hunt echoed this sentiment, highlighting the positive impact of the tax cuts on working families and the broader economy.
These measures are expected to stimulate economic growth by encouraging more people to enter the labor market. The Office for Budget Responsibility (OBR) predicts an increase in total hours worked equivalent to almost 200,000 full-time workers by 2028-29.
To assist individuals in understanding their potential savings, HM Revenue & Customs (HMRC) has launched an updated online tool. Additionally, changes to the High Income Child Benefit Charge (HICBC) thresholds and rates will provide further relief for families, benefitting 170,000 families and 485,000 hard-working families, respectively.
These initiatives build upon recent measures aimed at alleviating the cost of living for households, including increases to the National Living Wage, reductions in energy bills, and enhancements to the Local Housing Allowance.
Furthermore, the government remains committed to maintaining the Triple Lock, ensuring that pensioners receive adequate support in the years to come. Overall, these efforts reflect the government's dedication to supporting workers and families across the UK while fostering economic growth. Photo by Carlos Delgado, Wikimedia commons.