This week, Chancellor Jeremy Hunt declared a significant 2p cut to National Insurance in his recent Spring Budget. This move is part of the government’s effort to offer “permanent” tax cuts to families. While there are mixed reactions to the efficacy of these tax cuts, it’s crucial to understand what National Insurance is and how this reduction could affect the average person.
National Insurance Explained
National Insurance (NI) is a fundamental part of the UK’s tax system. It’s a contribution made by employees, the self-employed, and employers, primarily designed to fund various state benefits, including the NHS, state pension, and other welfare initiatives. These contributions are contingent on one’s earnings, with employees currently contributing 10% on earnings above £12,570 and 2% on income over £50,270. For the self-employed, the current rate is 9% on profits over the same threshold of £12,570.
Impact of the National Insurance Cut
The recent 2p cut in National Insurance rates is a significant development for earners across various brackets. Here’s how it translates to savings:
- On a £20,000 salary: Save £148.60
- On a £30,000 salary: Save £348.60
- On a £50,000 salary: Save £748.60
- On salaries of £75,000 and £100,000: Save £754
These savings could provide a cushion against the rising cost of living, leaving more disposable income in the hands of workers.
To summarise
The recent cut in NI rates represents a significant financial shift for millions of UK workers. While it may not be as visible as income tax cuts, the implications for personal finances are tangible, with the savings potentially offering a buffer in these financially challenging times.
For more information, or to get a free, no-obligation quote and understand how Qualitas can support your business for tax year-end, get in touch today