MILLIONS of hard-up Brits will receive a much-needed pay rise in less than two months as the National Insurance hike is to be scrapped.
From November 6 around 28 million workers will save hundreds of pounds a year as a result of the tax cut.
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As the cost of living crisis continues to crunch family finances, Kwasi Kwarteng today vowed that axing the National Insurance hike would “raise living standards for all”.
National Insurance is paid by employees over the age of 16 and earning above £242 a week.
It’s also paid by self-employed Brits making a profit of £6,725 or more a year.
The 1.25 per cent National Insurance hike was introduced by Boris Johnson’s government in April this year.
Liz Truss has wanted to get rid of it for a long time in an effort to make her mark as a low tax PM.
Now, 28 million Brits will be able to keep more of what they earn.
The move will save workers an average of £135 a year in 2022, rising to £330 in 2023-24.
Lower earners, on less than £12,570 a year, won’t benefit from the change.
Meanwhile, 920,000 businesses will keep almost £10,000 on average.
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The health and social care levy, a tax that was due to replace the NI hike in April next year, is also in the bin.
The levy was expected to raise around £13 billion a year to help tackle NHS backlogs and fund social care.
Mr Kwarteng today vowed to continue funding both services at the same level.
But the money will now come from general taxation instead.
As a result of the hike cut, basic rate taxpayers on average will gain around £75 in 2022-23, rising to £175 in 2023-2024.
Higher rate tax payers will save around £300 in 2022-23, rising to £700 in 2023-2024.
The Chancellor said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
“Cutting tax is crucial to this – and 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.”
To raise living standards for all, we need to be unapologetic about growing our economy.
Kwasi Kwarteng
In the seven months that the National Insurance hike was in place, employers had to fork out a whopping £5.11 billion.
Shadow Business Secretary Jonathan Reynolds hit out at his former counterpart, accusing the Tories of “flip flopping” on big policies that affect British businesses.
He said: “Conservative indecision and flip flopping cost employers over five billion pounds at a time when many were struggling to keep the doors open.
“Businesses need a government that can give them certainty and stability not gimmicks and confusion.”
Tomorrow Mr Kwarteng will announce the government’s hotly anticipated mini budget.
The event will see the Chancellor slash a load of taxes, including stamp duty and corporation tax, on top of the national insurance hike to drive economic growth.
Currently, no stamp duty is paid on the first £125,000 of any home but Mr Kwarteng is considering raising this to £250,000.
It is hoped this would help kick start a house-buying revolution.
It’s also possible that the basic rate of income tax could be slashed from 20p to 19p in the pound, and a planned rise in corporation tax is likely to be binned.
The idea is that by keeping taxes lower, major companies will have more money to invest in the British economy, ultimately helping it to grow.
