What does the National Insurance 2% cut mean for us and how much more take-home pay will we get?

The chancellor's 2% National Insurance cut which was announced in the Autumn statement comes into effect tomorrow - but what does it mean for you and how much more take-home pay will you receive.

Dubbed a reason for optimism by a personal finance expert speaking to ITV News, it marks a significant change to National Insurance contributions for both employees and self-employed people.

Workers will get hundreds of pounds more in their annual take-home pay after the National Insurance rate for 27 million UK employees falls from 12% to 10%.

The move is a step towards improving things for workers facing income tax rises, Kevin Mountford from Raisin.co.uk said.

  • What does this mean - how much more money will we pocket?

According to the government, an employee earning £35,400 will get an extra £450 in their pocket.

The chancellor also said an average nurse would get £520 more every year, and a typical police officer would get £630 more.

The two million self-employed could save an average of £350 a year from April, Mr Hunt said. He abolished the Class 2 National Insurance and reduced the Class 4 rates by 1% - to 8%.

  • But it won't offset the rise in income tax due to the tax threshold freeze

Experts agree that while we'll be paying less in National Insurance, it won't make up for the increase in income tax we pay - due to the tax threshold freeze.

Tax thresholds have been frozen since April 2021 - and will continue to be frozen until April 2028.

So, as our wages rise with inflation, some of us will move up tax brackets.

As a result, higher income tax rates will go from being reserved only for the richest to something a far more substantial proportion of the population, including some teachers, nurses and electricians, can expect to encounter.

Even if we stay in the same tax bracket, a larger proportion of our income will be taxable - as the £12,570 tax-free allowance stays unchanged.

Money Saving Expert Martin Lewis said in a video posted on X that "it is still an attempt to be a bit more generous and get more money into people's pockets".

Mr Mountford agreed, telling ITV News: "The kind of criticisms of these things is that money is given in one hand, and taken away in the other.

"The way I would look at it - the news on the freeze in allowance was already put into place, so this is showing a step towards improving that."

Personal finance expert Kevin Mountford said the National Insurance cuts are a step towards improving things for workers facing income tax rises

  • Why not just cut income tax to boost people's savings?

Speaking from Manchester, Mr Mountford said increasing income tax in line with salary increases would have given the average workers a bigger benefit.

But he said: "You could argue it benefits the higher income individuals, as well as the lower. Whereas this one (NI cut) is very much aimed at trying to boost savings for average salary earners."

Ultimately, he said, the Treasury will earn more from collecting more income tax - especially with the way salaries have been increasing.

He said the decision to boost savings through National Insurance cuts is a responsible one.

"With a general election looming next year, it would've been quite tempting to give more and more away, and which ever government in after the election, they'd be the ones left holding the baton and left to address it.

"I do think the steps have been taken in the right direction. Could they have gone further? Yes, but does that go into the realms of being irresponsible? Possibly."

The Chancellor announced National Insurance cuts for employees and self-employed workers Credit: PA

His verdict: "The autumn statement was responsible and possibly more advantageous than we expected in many areas, but you won't please everybody.

"What we've heard today gives us a degree of optimism as we go into 2024, particularly as inflation comes down, interest rates start to come down.

"We can have a little more optimism, because for households across the UK, it's been a pretty tough time.

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know