Hm Treasury
- Progress made on economy means government is able to cut taxes for hard working people
- Saving worth 450 for an average worker earning 35,400 a year
Millions of workers are going to start seeing a boost to their take home pay today as Januarys pay comes into bank accounts across the UK.
With millions of monthly earners getting paid today (Wednesday 31 January 2024), a household with two average earners will be starting to see a nearly 1,000 a year benefit from the Chancellors record personal tax cut.
Thanks to the progress made against its economic priorities, the government announced it will cut National Insurance by 2p from 12% to 10% at the Autumn Statement and made sure it took effect within weeks of the announcement, as part of its plan to reward work and grow the economy. The change is a more than 15% reduction in National Insurance, saving 450 this year for the average salaried worker on 35,400.
Millions of people working different jobs across hundreds of industries will now be better off. To a pub landlord thats 418 a year, a bus driver 328, a nurse 527. A teacher will pay 635 less in National Insurance contributions this year.
Todays historic NICs cut takes effect with the government having faced the legacy of Covid-19, and global instability with war in Ukraine and the Middle East.
In the past year, inflation has halved; the economy has recovered more quickly from the pandemic than first thought; and debt is on track to fall. The government is sticking to the plan and is building a stronger economy where hard work is rewarded and ambition and aspiration are celebrated.
Chancellor of the Exchequer Jeremy Hunt said:
I never shied away from making the tough decisions needed yesterday to cut taxes today.
This January pay boost for hard-working Brits is part of our plan to grow the economy and build a brighter future where hard work is always rewarded, relieving pressure on UK workers by putting around 450 back in their pockets.
The cut means that for those on average salaries, personal taxes would be lower in the UK for single parents with no children than every other G7 country, based on the most recent OECD data. The UK also has the most generous starting allowances for income tax and social security contributions in the G7.
To mark the tax cut, earlier this month HMRC launched anonline toolto help people understand how much they could save in National Insurance this year.
The tool uses salary information to give employees personalised estimates of how much they could save because of the governments changes, and is hosted on the governments cost of living supportwebsite on gov.uk.
The last major cut to the current personal tax system of todays magnitude was when the National Insurance personal allowance increased from 9,880 to 12,570. This was the largest ever cut to a personal tax starting threshold, allowing working people to hold on to an extra 2,690 free from tax whilst last year taking around 2.2 million people out of paying tax altogether.
The cut to National Insurance combined with above-inflation increases to tax thresholds since 2010 means that the average earner will pay over 1,000 less in personal taxes than they otherwise would have done.
The independent Office for Budget Responsibility (OBR) says that, by 2028-29 this tax cut will increase the number of people in employment by 28,000 alongside a substantial economic benefit from those in work increasing their hours which the OBR forecast will be equivalent to 79,000 on a full-time equivalent basis. Overall, the OBR says that by 2028-29 this measure will increase the number of hours worked by new and existing employees by 0.3%, or 94,000 in full-time equivalent terms.
At the Autumn Statement the Chancellor Jeremy Hunt announced the biggest package of tax cuts to be implemented since the 1980s. In addition to todays action, he announced a National Insurance cut for 2 million self-employed people, which will take effect on 6 April 2024 and is worth 350 for the average self-employed person on 28,200. He also made full expensing permanent, which at 11 billion per year is the biggest business tax cut in modern British history helping businesses invest for less. Over 200 business leaders told the government that it would have the single most transformational impact on business investment and growth.
The OBR says these two measures will increase the number of people in work and grow the economy.
He also announced the biggest ever increase to the National Living Wage, froze alcohol duty for six months and extended cuts to business rates relief for the high street.
Further information
Todays tax cut combined with above-inflation increases to tax thresholds since 2010 means that the average earner will pay over 1,000 less in personal taxes than they otherwise would have done - this is based on the mean earnings for all employees from ASHE 2023. The income tax and employee NICs liability is compared to a hypothetical counterfactual where tax rates are kept unchanged and thresholds are uprated in line with inflation every year.
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Use HMRCs new online tool to estimate yearly national insurance savings thanks to the 2p cut
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Visit the governments cost of living support website
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National Insurance factsheet
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Latest OECD tax on wages data
Who does this help?
Source: Unless stated otherwise, the earnings are taken from the latest ASHE estimates for earnings by Standard Occupational Classification covering the 2022-23 tax year.
- Average full-time supermarket worker: 121
- Average retail sales assistant: 179
- Average full-time pub landlord: 418
- Average sports industry worker: 226
- Average creative industry worker: 350
- Average teacher: 635
- Average teaching assistant: 158
- Average librarian: 215
- Average university lecturer: 600
- Average electrical manufacturer: 250
- Average heat pump installer: 545
- Average fishing industry worker: 176
- Average agricultural worker: 225
- Average community support worker: 341
- Average bricklayer: 360
- Average construction worker: 353
- Average worker in scientific research: 567
- Average worker in the tech industry: 656
- Average train driver: 754
- Average bus driver: 328
- Car salesperson: 280
- Average lorry driver: 486
- Junior State Pension admin worker: 263
- Senior State Pension admin worker: 383
- Junior Jobcentre worker: 263
- Senior Jobcentre worker: 383
- Average social care worker: 106
- Band 6 (Senior) nurse: 601 (source: Pay scales for 2023/24 NHS Employers)
- Average full-time nurse: 527 (source: Pay scales for 2023/24 NHS Employers)
- Junior doctor: 754
- Average police officer: 635
- Immigration officer: 369 (source: Immigration officer/Explore careers/National Careers Service)
- Average Paralegal: 311
- Probation office: 384 <