National Insurance hike reversed next month – how much more will you save? | Personal Finance | Finance
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National Insurance contributions were introduced earlier this year in a bid to tackle NHS costs, however Chancellor Kwasi Kwarteng confirmed in the mini budget that this descison would be reversed. The reversal will come into effect from November 6.
National Insurance contributions had increased from 12 percent to 13.25 percent in April.
This 1.25 percentage point rise was introduced to pay for health and social care.
The reversal of the hike, which was introduced by ex-Chancellor Rishi Sunak, will mean National Insurance contributions go back down to 12 percent.
Mr Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
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“Cutting tax is crucial to this.
“Whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn.”
The Treasury said most employees would 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.
It calculated that almost 28 million people will keep an extra £330 of their money on average next year, while 920,000 businesses are set to save almost £10,000 on average next year thanks to the change.
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If they have an employer, or they’re self-employed but work for an employer, they’ll pay Class 1 National Insurance contributions.
The amount people pay on National Insurance is then worked out based on their on gross earnings, before tax or pension deductions, above certain thresholds.
People start to pay National Insurance when they earn above £12,570.
When the reversal comes into play, individuals will pay 12 percent on earnings between £12,570 and £50,270.
They currently pay 3.25 percent on earnings over £50,270 but this will drop to two percent.
The Government has confirmed that these thresholds, which were lifted in July, will remain in place.
New calculations from Interactive Investor show the reversal of the 1.25 percentage point hike will result in an annual saving of £218 for someone earning £30,000, rising to £468 for someone earning £50,000.
Workers with an annual salary of £20,000 would save £93 under the policy, while someone earning £80,000 would be £843 better off.
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