Millions of people are set to get more money in their pay packet from the end of this week as another National Insurance cut comes into force. Chancellor Jeremy Hunt announced in his Spring Budget earlier this month that from Saturday, April 6, NI contributions will be cut by 2p.
National Insurance is a tax on earnings if you work or on your profits if you are self-employed. The change will see the starting rate for NI drop from 10% of eligible income to 8% for 27m workers.
According to Mr Hunt this means an annual saving of almost £450 for someone on the UK’s average full-time salary of £34,963. It comes after he made the same cut in his Autumn Statement in November, which saw the rate reduced from 12% to 10%. For money-saving tips sign up to our Money newsletter here.
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That came into effect from January 6, and Mr Hunt said the two cuts meant employed workers would get a combined £900 back in their pockets annually. Meanwhile April 6 will also see NI contributions cut for around two million self-employed workers, from 8% to 6% – worth an estimated £350..
Combined with the reductions introduced in November, the Chancellor said self-employed people would save an average of £650. Check how much you’ll save with the NI cut using our tool here:
However any savings are likely to be heavily offset by other long-standing government policies on tax and income. These have seen income tax and National Insurance thresholds – the rates at which people start paying income tax and National Insurance – frozen at £12,570. National Insurance thresholds used to rise every year, usually in line with inflation, but are frozen at their current levels for four more years until April 2028.
This means that more people are being pushed into earning enough to start paying NI as well as into higher tax brackets, which is especially the case as wages rise. Analysis by the Resolution Foundation think tank predicts only those earning between £27,000 and £59,000 will be better off after the 2p cut comes in. This means millions of people earning below and above these salaries will still be worse off after the announcement. Read everything you need to know about the NI cut here.
