Government wants to ‘make work pay’ with National Insurance cuts
Chancellor Jeremy Hunt has unveiled a series of packages he hopes will put more money in people’s pockets ahead of the forthcoming General Election – as well as entice more back into the labour market and “reward work”.
From January, employee National Insurance Contributions will drop from 12% to 10%, said Hunt, meaning a £450 tax cut for the average worker earning £35,400.
The Chancellor said: “We are helping people keep more of the money they earn and making work pay”.
Hunt announced a cut in Class 2 and Class 4 National Insurance contributions by the self-employed by 1% each in a move that he said will benefit two million self-employed people and save them £350 a year.
Hunt also said that savers should be able to invest in the banks they use day to day, adding that the Government is exploring options for a retail offer of NatWest shares as part of plans to reduce the government’s stake.
The Chancellor said that this would “promote a savings and investment culture”.
There were also new rules for pension funds.
The Chancellor said he will give workers the right to ask new employers to pay pension money into an existing pension scheme.
Elsewhere, the National Living Wage is set to increase to £11.44 an hour – a £1.02 increase – meaning a pay boost for those 23 or over.
The rise comes after the Government took advice from the Low Pay Commission. It will mean an extra £1,800 a year in the pay packets of those on the lowest wages in the UK.
Meanwhile, the Minimum Wage rate will also rise; those aged 18-20 will receive at least £8.60 per hour from April – an increase of £1.11.
Those 16-17 year olds on apprenticeships will receive a rise of £1.12p an hour – up to £6.40 an hour, while Hunt also said the Government will increase the state pension by 8% to £221.20 a week by April 2024.
Hunt said: “Conservatives know that a dynamic economy depends less on the decisions and diktats of ministers than on the energy and enterprise of the British people.
“The Conservatives will reject big government, high spending and high tax because we know that leads to less growth, not more.”
Suzy Harris-Milnes, tax partner at BHP said, “From an individual’s point of view it was a positive Autumn Statement, with the ‘triple lock’ on the state pension continuing with an 8.5% rise and the increase of the National Living Wage to £11.44 per hour. The cuts for both self-employed and employees to National Insurance, will also be welcomed but perhaps not as beneficial to those on higher incomes.
“However, with the changes to National Insurance for those employed due to take effect on 6 January, employers don’t have long to update their payroll systems to meet this deadline.
“It’s also important to note that despite the welcome changes it was disappointing that the often-predicted reforms to Inheritance Tax once again failed to materialise, but in a pre-election statement this shouldn’t be a surprise.”