During the Spring statement, Chancellor Jeremy Hunt said the move would benefit 27million workers and would give the average person earning £35,000 a year an extra £450
Millions of workers will see their take home pay rise after National Insurance is cut next week.
It was announced in the Spring Statement that the starting rate for National Insurance would be cut by 2% from Saturday, April 6 2024. National Insurance is a tax you pay on your earnings, and you start paying it when you earn £12,950 a year. Currently, you pay 10% on earnings between £12,570 and £50,270 – this is called Class 1 National Insurance contributions.
However, from April 6, this rate will be cut to 8%. During the Spring statement, Chancellor Jeremy Hunt said the move would benefit 27million workers and would give the average person earning £35,000 a year an extra £450.
The tax is also being cut for two million self employed workers. This rate – called Class 4 contributions – will be cut from 8% to 6%. The Government says this is worth £350 to a self-employed person earning £28,200 a year.
The rate on income and profits above £50,270 remains at 2% and Class 2 contributions will be scrapped altogether from April 6.
This was the second National Insurance cut this year with the first being introduced in January when it was cut from 12% to 10%. When combined with the latest cut, a worker on £35,000 will save about £900 a year according to the Government.
It’s important to remember that the Government has also frozen the thresholds for when you start paying National Insurance and the income tax thresholds. These used to rise each year with inflation. Freezing the thresholds means that more people start paying taxes as their wages increase, and more people pay higher rates. This means many Brits will not actually benefit from the cuts.
National Insurance is different from income tax, even though it works in a similar way. The money from National Insurance is used to pay for things such as the state pension, and statutory sick pay. It is also used to fund the NHS. Your National Insurance Contributions (NICs) also help you qualify for certain benefits and the state pension as the Government records how many years of contributions you have made.
If you do not work, for example because you are a carer or claim benefits, you might be able to receive National Insurance credits instead, which mean you will still qualify for the relevant benefits. You can also make voluntary contributions to plug gaps in your record. You do not pay National Insurance if you are under 16, not earning above £12,570 a year, or are over the state pension age of 66 – this means you will not be impacted by the cuts.
