National insurance contributions cut by 2%

The major giveaway at the Budget was a further 2% cut in National Insurance for workers.

If you are an employee, you currently pay 10% on earnings between £12,570 and £50,270.

This is being reduced to 8% from 6 April 2024. Additionally, for the self-employed, from 6 April 2024 the Class 4 NIC rate will be cut from 8% to 6%.

The Chancellor says that combined with the changes announced in the Autumn 2023 statement, 27 million people will gain £900. Also 2 million self-employed people will gain £650.

Who does it apply to?

It only applies to earned income, so pensioners will not benefit, nor will those who receive income from savings and investments such as property. Company owners who take dividends rather than salary will not benefit either.

Will workers and self employed really be better off?

Income tax thresholds, which usually rise in line with inflation, were frozen by Mr Sunak as Chancellor in 2022 until 2028. Calculations by the Resolution Foundation show only those paid between £27,000 and £59,000 would be better off because of both the Autumn 2023 Statement and Wednesday’s Budget, once the freeze in tax thresholds is accounted for.

Higher earners will be worse off by around £500.

Those paid £16,000 will be worst off as they will lose more from tax threshold freezes than they gain from cuts.