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- 27 million people to get tax cut from today as the main rate of employee National Insurance will be cut by two percentage points, from 12% to 10%.
- Change in gear for government, cutting taxes for hard working people so they have more money in their pocket.
- Online tool launched to help workers estimate their savings.
The main rate of National Insurance has been cut by 2p from 12% to 10% today (Saturday 6 January 2024). This reduces National Insurance by more than 15%, 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. An average full-time nurse will save 520, a typical junior doctor 750 and an average teacher 630.
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. With a renewed focus on the long-term decisions to strengthen the economy, the government is changing gear and cutting taxes for hard working people, giving them the opportunity to build a wealthier, more secure life for themselves and their families.
Prime Minister Rishi Sunak said:
We have made tough decisions on the economy, supporting people through global shocks such as the pandemic and Putins 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.
Todays tax cuts will directly reward hard working people, putting 450 back in the pocket of the average worker and helping them make ends meet.
Chancellor of the Exchequer Jeremy Hunt said:
With inflation halved, weve turned a corner and are cutting taxes starting with todays 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.
The cut means that for those on average salaries, personal taxes would be lower in the UK 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, HMRC have launched an online tool to help people understand how much they could save in National Insurance this year.
The tool will use salary information to give employees personalised estimates of how much they could save because of the governments changes, and will be hosted on the governments cost of living support website 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 in July 2022. 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 taking 2.2 million people out of paying tax altogether.
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.
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, the Chancellor also 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 announced the biggest ever increase to the National Living Wage, effectively cut corporation tax by more than 55 billion as he made full expensing permanent to help businesses invest for less, froze alcohol duty for six months and extended cuts to business rates relief for the high street.
Todays historic National Insurance cut takes effect following the government stepping in to support households during the Covid-19 pandemic and throughout Putins barbaric war in Ukraine. The government took the decision to manage the public finances responsibly by not saddling future generations to help pay down debt.
Further information
- Use HMRCs new online tool. It will be online at 05:00 on Saturday 6 January 2024.
- Visit the governments cost of living support website
- National Insurance factsheet
- Latest OECD tax on wages data
- Visit the Treasurys Flickr to view photos from the Chancellors visit to Openreach, Crawley to mark the NICs cut
- Todays NICs cut has reduced the 32% combined tax rate for employees (income tax + national insurance) paying the basic rate of tax to 30% - the lowest since the 1980s.
- From April 2024, a full time National Living Wage workers take home pay will be 30% greater in real terms than it was in 2010, due to successive increases in the National Living Wage and changes to personal tax rates and thresholds.
- The OBR say 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 say 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. This shows the government is making work pay.
Who does this help?
- A senior nurse with 5 years of experience on 42,618 will receive an annual gain of 600.
- An average full-time nurse on 38,900 will receive an annual gain of over 520.
- An average police officer on 44,300 will receive an annual gain of over 630.
- A typical junior doctor on 63,000 will receive an annual gain of over 750.
- A cleaner working night shifts on 21,000 will receive a gain of 170.
- A typical self-employed plumber on 34,400 will receive an annual gain of 410.
- An average teacher on 44,300 will receive an annual gain of over 630
- A hard-working family with 2 earners on the average earnings of 35,404 will b