Boost for 27 million Brits’ wallets as Chancellor's National Insurance cut comes into force

6 January 2024, 00:18 | Updated: 6 January 2024, 00:41

Millions of Brits will start saving on their National Insurance contributions from today after the Chancellor's planned tax cut.

Chancellor Jeremy Hunt pledged to make a cut to National Insurance contributions in his Autumn Statement, alongside more than 100 other measures to help boost the economy ahead of the next general election.

Under the cut, contributions have been slashed by two percentage points, from 12% to 10%.

The average salaried worker on £35,400 will save £450 a year and households with two average earners will save nearly £1,000.

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Chancellor Jeremy Hunt praised the cut, as he said the economy has 'turned a corner'.

Mr Hunt said: “With inflation halved, we’ve turned a corner and are cutting taxes – starting with today’s record cut to National Insurance worth nearly £1,000 for a household.

“From nurses and brickies, to cleaners and butchers, 27 million hard-working Brits will have a little more cash in their pockets.”

Mr Hunt said the cut was the “start of a process”. “If I can afford to go further I will…I don’t know yet if I can."

"We want to do this because it helps families, it also helps to grow the economy, and we believe that a lightly taxed economy will grow faster and in the end that'll mean more money for public services like the NHS."

Under the slashed rates, an average full-time nurse will save £520 annually while an an average junior doctor will save £750 and a teacher £630.

Prime Minister Rishi Sunak said: “We have made tough decisions on the economy, supporting people through global shocks such as the pandemic and Putin’s illegal invasion of Ukraine. It is because of the tough decisions this government has taken that today we are able to cut taxes for 27 million people across the UK.

“Today’s tax cuts will directly reward hard working people, putting £450 back in the pocket of the average worker and helping them make ends meet.”

But the cut to national insurance comes as the Government has frozen the income tax threshold, providing a de facto tax rise to millions.

The Institute for Fiscal Studies has said the Autumn Statement gave back just £1 in tax cuts for every £4 of tax rises due to threshold freezes since 2021.

Labour has criticised the cut, labelling it a “raw deal”.

The party said that frozen income tax and national insurance thresholds means families have been drawn into higher tax bands, meaning they are no better off under the cut.

Shadow chancellor Rachel Reeves said: "Under Rishi Sunak's raw deal, for every extra £10 people are paying in tax they are only getting £2 back."

Mr Hunt also said in his Autumn Statement that he is scrapping Class 2 National Insurance, paid by many self-employed workers, from April which would save the average self-employed person £192 per year.

It comes after inflation dropped dramatically to the lowest rate in two years in November - falling from 4.6% to 3.9%.