National Insurance reduction: How much money will we really save?

ITV News Reporter Charlie Frost explains how the cuts to National Insurance will impact take-home pay

The main rate of National Insurance will be cut by two percentage points, from 12% to 10%, on Saturday.

The move, announced in last year’s autumn statement, was hailed by the Conservatives but Labour called it a “raw deal” and economists said many households are still facing the burden of high taxes.

Chancellor Jeremy Hunt said the pre-election cut means families with two earners are nearly £1,000 better off.

Ministers have previously said cutting the main rate for employees is a tax cut worth £450 for the average employee on £35,400 in 2024-2025.

Prime Minister Rishi Sunak, who has said he wants to keep cutting people’s taxes if possible, said it was possible because of the “tough decisions” taken by the government.

The Chancellor said: “Today’s cut in National Insurance by 2% means that a typical family with two earners will be nearly a thousand pounds better off this year.

“That is really important in a cost-of-living crisis where people have been feeling real pressure on family budgets, but also it rewards work, it’ll bring more people into the labour force and that is good for growing the economy.”

But finance experts and economists have said frozen tax thresholds, which have been pushing people into higher tax brackets, will offset the National Insurance boost for many people.

Think tank the Resolution Foundation expects the biggest gains from this year’s tax changes will be for people earning about £50,000, who will particularly benefit from the rate cut, while still losing out somewhat from the personal allowance freeze.

Adam Corlett, principal economist at the think tank, said cutting National Insurance was a “smarter choice than the options of cutting income tax or inheritance tax”.

“But for many, particularly those earning less than £26,000, the tax cut today will be offset by the tax rise that is effectively coming in April, when personal tax thresholds are frozen again.”

Chancellor Jeremy Hunt will announce further tax cuts could be announced in the spring Budget. Credit: James Manning/PA

There is speculation that further tax cuts could be announced in the spring budget on March 6, as Mr Sunak prepares for a general election later this year.

This could be Mr Hunt’s last chance to introduce major tax and spending changes before voters go to the polls.

Labour has rubbished the Tories’ claim to be offering households a tax cut, calling it a “raw deal”.

Shadow chancellor Rachel Reeves said: “Never have people paid so much in tax and got so little in return in the form of public services.

“This is the year of choice, the year the British people will give their verdict on Rishi Sunak and 14 years of Conservative government.”

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