Boris Johnson briefs cabinet on National Insurance cuts
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Earlier this year, Prime Minister Liz Truss’ Government announced the 1.25 percentage point hike to National Insurance contributions would be reversed. On top of this, the Government confirmed the Health and Social Care Levy will be cancelled which was introduced to pay for the UK’s struggling social care sector. As a result of this change, taxpayers will save £330 a year which could come in handy during the cost of living crisis.
Around 28 million taxpayers across the country are set to benefit from this extra hundreds of pounds.
The reversal of the National Insurance rise is set to be implemented next month on November 6, 2022.
Originally, the hike to National Insurance contributions was brought in as a precursor tax to the Health and Social Care Levy.
However, Ms Truss has committed to cutting taxes as part of her Government’s “pro-growth” agenda.
On top of this, 920,000 businesses will experience a cut in National Insurance bills, with 20,000 no longer having to pay for National Insurance.
In July, National Insurance thresholds were increased in July 2022 to help 2.2 million of the poorest people in the UK out of paying the tax.
The Government has promised to keep thresholds at the same level as they are to further support these families.
This latest wave of National Insurance cuts comes as taxpayers are struggling with rising inflation and energy bills.
Kwasi Kwarteng, the Chancellor of the Exchequer, shared why the Government is opting to carry out this tax cut at this time.
Mr Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages.
“The reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn.”
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Steven Cameron, a pensions director at Aegon, discussed how taxpayers will benefit from the Government’s latest decision.
Mr Cameron explained: “Chancellor Kwasi Kwarteng has announced a reversal of the 1.25 basis point increase in employee and employer National Insurance Contributions introduced last April by his predecessor Rishi Sunak.
“The money raised by the increase was to provide additional funding to support the NHS recovery from the pandemic and over time to pay for the government’s share of its new social care deal.”
However, the pension expert did not think this latest move will do enough to support those earning under the personal allowance threshold.
He added: “It’s good news the Government said it is committed to maintaining the funding for the NHS and care sector, worth around £13billion a year, despite the levy being scrapped.
“But questions remain over whether this will be possible alongside speculation around other income tax cuts.
“While reversing the National Insurance increase will lead to an increase in take-home pay for most, it would not make any difference to those earning under £12,570.”
The Chancellor is set to announce a further debt-cutting plan on October 31, 2022.
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