Millions of workers will be better off this month following a major change to national insurance contributions. The government has now reversed the 1.25 per cent hike that was brought in earlier this year, meaning workers will be taking home more of their pay.
The rise was introduced by Boris Johnson’s government, with Rishi Sunak as chancellor, in April. Mr Sunak devised the levy as a measure to help fund social care and deal with the NHS backlog.
But the hike was reversed by former chancellor Kwasi Kwarteng under the leadership of Liz Truss in his infamous tax-busting mini-budget last month. On Sunday, November 6, the reversal came into effect - despite Mr Sunak now being in charge at No 10.
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The scrapping of the national insurance hike is one of just a few economic policies introduced by Ms Truss and Mr Kwarteng that has not been axed by new chancellor Jeremy Hunt. When announcing the reversal, the Treasury said most employees will receive a cut to their national insurance contribution directly via their employer’s payroll in their November pay, although some may be delayed to December or January.
The change brings the rate of national insurance contributions you pay on earnings between £12,570 and £50,270 back down to 12 per cent, from 13.25 per cent. On earnings above £50,270, the rate has dropped from 3.25 per cent back down to two per cent.
The government claims that the change means around 28 million people across the UK will keep an extra £330 a year on average in the 2023/24 tax year. Taking into account July's increase in national insurance thresholds, as well as the health and social care levy reversal, people will be £500 better off on average next year, according to the government.
The exact amount that you will save depends on how much you earn. According to personal finance specialists at Hargreaves Lansdown, this is how much people on different salaries will save:
- Workers on £20,000 will save £93 a year
- Workers on £30,000 will save £218 a year
- Workers on £40,000 will save £343 a year
- Workers on £50,000 will save £468 a year
- Workers on £60,000 will save £593 a year
- Workers on £80,000 will save £843 a year
- Workers on £100,000 will save £1,093 a year
The government has vowed that funding for health and social care services will be maintained at the same level as if the levy were still in place. The levy was expected to raise around £13 billion a year to fund social care and deal with the NHS backlog which has built up due to the Covid pandemic.
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