Workers will see the impact in their payslips from the 30 April
- Millions of workers checking payslips will see a tax cut
- As the economy turns a corner, the government is rewarding hard work, with over £900 a year boost for typical worker
- Marks another step in long-term ambition to end unfair double tax on work
There are 27 million employees in the UK, with millions of them on monthly salaries will wake up with a little more cash in their pockets, as the government’s Spring Budget cut to National Insurance appears in April’s pay-packets. Since autumn 2023, National Insurance Contributions (NICs) for workers have been slashed by a third – the largest cut to employee and self-employed NICs in history.
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. An average full-time nurse will save £1,053, a typical junior doctor £1,508 and an average teacher £1,270.
These cuts are possible because the economy is turning a corner, thanks to the government’s decisive action that has helped bring inflation down from 11.1% to 3.2% and ensure borrowing costs start to fall. Because of this progress, the government can now cut taxes to reward work and grow the economy.
This marks another step towards the longer-term ambition to end the unfair double tax on work and abolish employee and self-employed NICs altogether.
These tax cuts – worth over £20 billion a year – have been achievable while protecting spending including keeping the Triple Lock and the government has commitment to going further only when it’s possible to do so.
Prime Minister Rishi Sunak said:
At the start of last year I made to pledge to half inflation. And because of the difficult decisions we have taken, inflation has more than halved and we are now able to reward work, and cut taxes for millions of workers who are seeing the benefit in their pay checks today.
We have now cut National Insurance by £900 because it’s unfair that workers pay double tax on their income. We need to make it much simpler and much fairer and we are going to continue cutting this tax until it’s gone – while continuing to protect pensioners with the triple lock and providing record levels of funding to the NHS.
Chancellor of the Exchequer Jeremy Hunt said:
We’re on the right track – we’ve been able to slash National Insurance to return hundreds of pounds back into the pockets of hard-working Brits because of the decisions we’ve made to manage the economy responsibly.
Over the years ahead we want to get rid of National Insurance completely for workers – it is an unfair double tax on work and we’ve shown we can protect spending on public services while eliminating it.
The tax cuts to date mean that for single individuals on average salaries, personal taxes would be lower in the UK than every other G7 country, based on the most recent OECD data.
The smart nature of 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 launched an updated online tool earlier this month to help people understand how much they personally could save in National Insurance this year.
These cuts to reward work follow a raft of changes that came into force on 1 April and could save households up to £3,850 a year 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.
Who does this help?
The combined cuts to National Insurance mean:
- a hard-working family with two earners on the average salary of £35,400 each will be better off by £1,826
- an average full-time nurse on £38,900 will be better off by £1,053
- a senior nurse with five years experience on £42,618 will be better off by £1,202
- the average police officer on £44,300 will be better off by £1,270
- a cleaner working night shifts on £21,058 will be better off by £340
- a typical junior doctor on £65,000 will be better off by £1,508
- a typical self-employed plumber on £34,361 will be better off by £846
- the typical teacher on £44,300 will be better off by over £1,270
As a result of National Insurance cuts at the last two fiscal events combined with the government’s cuts to the High-Income Child Benefit Charge:
- a couple with 2 school-aged children, both working full-time, one on £60,000 and one earning the average salary (£35,400) will receive an annual gain of £4,600.
- a couple with 2 school-aged children, both working full-time, one on £80,000 and one earning the average salary (£35,400) will receive an annual gain of £2,400.
- a single earner couple with 2 school-aged children, where one is working full-time on £62,000 will receive an annual gain of £3,500.
