- Hunt delivers a tax cut in the Autumn Statement by slashing National Insurance
- But thresholds remain frozen
National Insurance rates will be cut for both the self-employed and employees Chancellor Jeremy Hunt announced in today’s Autumn Statement.
The Class 1 National Insurance rate will be cut from 12 per cent to 10 per cent from January. Class 1 is paid by employees on annual earnings between £12,570 and £50,270 and the cut translates into £754 a year saving for employees who earn £50,270 and above.
The government will also reduce National Insurance for the self-employed, who currently pay both Class 2 and Class 4 rates. Class 2, currently £3.45 a week, will be abolished while the Class 4 rate will be reduced from 9 per cent to 8 per cent from April. The self-employed also pay Class 4 on annual earnings between £12,570 and £50,270.
The changes will be effective from 6 April 2024 and Hunt said that the average self-employed taxpayer will save £350 a year.
Despite these rate cuts, the thresholds at which people pay income tax and NI have been frozen since 2022 and are due to remain until April 2028. Due to the effects of inflation and wage growth, more people have been dragged into higher tax bands, because of the so-called fiscal drag.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said that the NI cut would bring real relief and wasn't to be sniffed at. However, she added: “The Treasury has done nothing to protect us from the misery of fiscal drag, and means the lion’s share of the damage done to our finances from these tax hikes will still continue to be felt years down the line.”
The tax cuts are expected to cut Treasury funding by more than £10bn every year.
