29 million Brits will see their hard work rewarded from tomorrow
(6 April), as record tax cuts come into full force.
Since Autumn 2023, National Insurance Contributions (NICs) for
workers have been slashed by a third - the largest cut to NICs in
history - with a longer-term ambition to end the unfair double
tax on work and abolish employee and self-employed NICs
altogether.
Since January, 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.
Over 2 million self-employed people will benefit from the main
rate of Class 4 NICs being cut from 9% to 6% alongside the
abolition of the requirement to pay Class 2 NICs - simplifying
the tax system and saving an average self-employed person on
£28,000 over £650 a year.
These cuts are possible because the economy is turning a corner,
thanks to the government's decisive action to bring inflation
down from 11.1% to 3.4% and ensure borrowing costs start to fall.
Because of this progress, the government can now cut taxes to
reward work and grow the economy.
The tax cuts – worth £20 billion a year – mean that those
individuals on average salaries will now pay less in personal
taxes than they would in any other G7 country.
Prime Minister Rishi Sunak said:
“Hard work is one of my core values, and the progress we have
made on the economy means we can reward work with a tax cut worth
£900 for the average earner.
“This marks the next step in our plan to end the unfairness
of double taxation of work by abolishing National Insurance in
the long term.”
Chancellor of the Exchequer, Jeremy Hunt, said:
“The record tax cuts taking effect tomorrow show our economic
plan is working – because of the progress we've made we're
putting hundreds of pounds a year back into the pockets of
working people across the country.
“It shows we stand behind those who work hard and fires the
starting gun on our long-term ambition to end the unfair double
tax on work.”
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 has launched an
updated online tool to
help people understand how much they personally could save in
National Insurance this year.
They come into effect on the same day as an increase to the
income threshold at which the High Income Child Benefit Charge
(HICBC) starts - from £50,000 to £60,000 - taking 170,000
families out of paying the charge altogether.
The rate at which the HICBC is charged will also be halved from
1% of the Child Benefit payment for every additional £100 earnt
above the threshold, to 1% for every £200, meaning Child Benefit
will not be withdrawn in full until individuals earn £80,000 or
higher. As a result of these changes, 485,000 hard-working
families will gain an average of £1,260 towards the costs of
raising their children in 2024/25.
The government has also committed to consulting in due course on
administering the HICBC on a household basis by April 2026, in
recognition of how charging on an individual basis can sometimes
lead to unfair outcomes, in particular for single parents and
single earner families.
These changes to support hard-working families follow a raft of
measures that came into force on 1 April that could save
households up to £3,850 a year on average 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.
And on Monday 8 April, the government will stand by its
commitment to maintain the Triple Lock by raising the full basic
State Pension by 8.5% to almost £170 a week, after the largest
ever cash increase last year. Changes like the introduction of
the Triple Lock and new State Pension have meant pensioners are
on average £1,000 better off than in 2010, according to the
Resolution Foundation.
