22 November 2023
If you are covering the changes to National Insurance for the employed and self employed, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
2p Cut to National Insurance:
"Hunt has given workers a miniscule nibble of carrot with his 2p cut to National Insurance contributions after they’ve been battered by stick recently. The reality is workers are just £2.68 a week better off due to today’s tax ‘giveaway’ than they would have been had tax thresholds not been frozen.
“More money in people’s pockets thanks to tax cuts is no doubt a good thing but this move gives someone on the average salary of £32,963 an extra £8.60 a week due to the NI cut. But the reality is you only are getting a benefit of around 50% of this due to the frozen tax bands and fiscal drag. If we assume the tax bands had increased by 2% over the last four years, someone earning £34,963 should be a further £308.40 better off. Therefore, if you take this off today’s headline saving in tax it is actually only a saving of £139.46 over the year or a rather measly £2.68 a week.
“Hardly life enhancing even for those with budgets stretched to breaking point. The 2p cut for the 12% rate has the dual impact of making only a very minor difference to the amount of money people have while simultaneously risking the lower inflation figure we have been striving for.
“Today’s move represents the starting klaxon for the Conservative party’s election campaign, and they are going to have to take some risks to help buoy their popularity. This meagre boost in disposable income will grab headlines but only pays lip service to providing actual financial relief for individuals.
But National Insurance is a cornerstone of funding for crucial public services like the NHS and state benefits. Reducing NI contributions could inadvertently strain these vital services. Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society."
Average savings for NI cut
|
12% |
10% |
saving |
|
|
£30,000 |
£2,091.60 |
£1,743.00 |
£348.60 |
|
£34,963 (average salary) |
£2,687.16 |
£2,239.30 |
£447.86 |
|
£40,000 |
£3,291.60 |
£2,743.00 |
£548.60 |
|
£50,000 |
£4,491.60 |
£3,743.00 |
£748.60 |
|
£100,000 |
£5,518.60 |
£4,764.60 |
£754.00 |
Abolition of Class 2 NICs
“The abolition of Class 2 National Insurance credits by Hunt which saves self-employed people £192 a year, sends a message that the government is no longer seeing self-employed people in the same way as employed.
“Previously there has been a sense that the employed and self-employed should be treated the same. Under these new rules the self-employed get benefits for essentially taking more risk and as such get benefits like the state pension in return. This is therefore a marked change in policy.”
