National Insurance cuts coming this week will see millions pay less tax - but there's a cost
03.01.2024 - 13:39
/ manchestereveningnews.co.uk
Millions of workers will see a cut to their National Insurance obligations this week.
The main rate of National Insurance will fall from 12 per cent to 10 per cent from Saturday, January 6. Chancellor Jeremy Hunt has claimed that the average worker on a £35,400 annual wage will save £450 across the tax year.
Despite this, many workers may still remain worse off due to the threshold for paying National Insurance remaining frozen until April 2028. This could result in many people still being dragged into paying for the tax for the first time if they receive a pay rise.
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While announcing the tax cut in the Autumn Statement, Mr Hunt said: "I would normally bring in a measure like this for the start of the new tax year in April, but instead, tomorrow I’m introducing urgent legislation to bring it in from 6 January, so that people can see the benefit in their payslips at the start of the new year."
National Insurance is effectively a tax on a worker's earning which is paid in relation to how much is being earned. Contributions from National Insurance payments contribute to eligibility for benefits such as state pension.
Most employees currently pay 12 per cent of their income on Class 1 National Insurance contributions on earnings above £12,570. Following this, 2 per cent is paid on earnings over £50,270 which will remain the same after next week.
The threshold of £12,570 will remain unchanged from January 6. Those who are self-employed will generally pay either Class 2 or Class 4 contributions.
From April 2024, Class 2 contributions will be scrapped. Currently, they are set at a fixed weekly rate of £3.45 on profits of more than £12,570