A further 2% cut in NICs in Spring Budget confirmed: Analysis and reaction from experts

by | Mar 6, 2024

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In his Budget Speech, the Chancellor has now confirmed that a 2% cut to NICs – in a move which had been widely reported/leaked prior to the speech.

With this measure the centrepiece of this year’s Spring Budget, experts from across the financial services spectrum have been sharing their reactions and what this latest cut to NICs, which follows the previous NICs cut announced in the Autumn Statement, actually means for workers.

Rachael Griffin, tax and financial planning expert at Quilter said:

“Chancellor Jeremey Hunt has opted for the cheaper and potentially less headline grabbing option of cutting NICs by a further 2%. This means that millions of hard-working Britons will see more money in their pockets every month, as the government tries to ease the pressure of the highest tax burden in decades. While a cut in taxes will for some be a needed boost, it hardly turns the dial much considering we are dealing with a historic tax burden at present. However, it will certainly be a crowd pleaser with someone earning £30,000 a year being around £58 better off a month if you also take into account the national insurance cuts in the Autumn Statement. However, many people don’t understand how national insurance works and a cut to income tax would have been easier for all to understand – but crucially much more expensive.”

Commenting on the Spring Budget, Les Cameron, Head of M&G Wealth’s team of pension and tax technical experts said:


“A cut to National Insurance is more targeted and less expensive than a general income tax cut as it only impacts the employed and self-employed. It also applies right across the UK, whereas any cut in income tax would not have fully applied in Scotland. 

“Those who don’t need the extra money to meet day-to-day living costs may want to consider using the additional money to boost their pension contributions or other savings to benefit them in the future.

“It’s important to remember that a decrease in National Insurance could have a knock-on effect on salary sacrifice arrangements, as any National Insurance savings made by the employee will be lower and therefore pension contributions will decrease.”


Shaun Moore, tax and financial planning expert at Quilter said:

“It had been heavily rumoured that the Tories wanted to at least cut National Insurance by 1% if not ideally 2% and the Chancellor by hook or by crook has made it happen despite worries that there was simply not enough fiscal headroom to make it work.

The Tories have been under significant pressure to make this budget a giveaway bonanza to help shore up their support as they go into an election where they are certainly not favourites. Whether this move will ultimately help garner support is yet to be seen and may be a case of too little, too late. The reality is that many people are looking to the difficulties that public services are facing at the moment and wondering how such a tax cut like this will impact the NHS, schooling and other state support.

12% (pre Autumn statement)10% (current)SavingAdditional 2%Total saving

National Insurance is a crucial element of funding for public services and while Hunt did make a commitment to provide a 1% real increase in funding and a commitment to work more efficiently, reducing NI contributions could make this hard to achieve. Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society.

It is important to remember though that this change gives nothing to pensioners who do not pay national insurance, so while an income tax cut was clearly deemed too expensive it might have had a broader impact on the nation as a whole.”

Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group said: “With budgets tight and economic growth in short supply, there will have been much debate over which giveaways to prioritise. The NICs cut will therefore benefit younger voters, apply across the UK and cost less than an income tax cut. This is because NI applies to working people and those above state pension age do not pay it. It is also a cut that will apply across the UK, as income tax rates are devolved in Scotland. Finally, analysis pre-Budget highlighted a 1p reduction in the basic rate of tax as more costly than a 1% NI cut.”


“As a result of the Spring Budget, workers will likely see their rate of National Insurance (NI) contributions cut from 10% to 8%, providing a welcome boost to their pay packet. As a result, someone earning an annual salary of £30,000 will have an extra £349 in their pocket each year.”

According to Sarah Coles, head of personal finance, Hargreaves Lansdown, even this “tatty-looking ferret pulled from a box labelled ‘rabbit’” is welcome as she comments:

“ This isn’t so much a rabbit pulled out of a hat as a slightly tatty-looking ferret dragged from a box, labelled ‘rabbit’. An income tax cut has been discussed for well over a year. A National Insurance cut is far better than nothing, but it would be a scaled-down, less attractive option. Jeremy Hunt just has to hope it didn’t bite.


With taxes swallowing such a massive proportion of GDP, any tax cut would have been welcome. This one will save us an average of £450 a year. And while the biggest savings are reserved for those earning more, every saving helps at a time when our own budgets are stretched so thin.

It’s easy to see why this may have pipped income tax to the post in the race for Budget tax cuts, because it’s much cheaper. A 2p cut would cost about £10 billion, which is more manageable for a Chancellor with shrinking headroom. However, the price Hunt would pay for opting for NI is clear. It would benefit fewer people. 27 million workers would pocket a tax cut, but millions more wouldn’t, because it wouldn’t affect the tax on pensions, and income from savings and investments like property. It means an awful lot of voters would get no benefit from the change.

The move could also suffer from the fact that National Insurance was cut in January – and we can see this didn’t make a dramatic difference in the polls. It may be that Jeremy Hunt decided this is all he can afford to offer right now. The question will be whether it’s a enough of a blockbuster tax cut to move the dial on a general election. Unfortunately, a cut in NI is not as good as it may sound, because it would come at the same time as yet another freeze in the personal allowance and the higher rate tax threshold, which the OBR says will see 1.1 million more people dragged into paying income tax and 800,000 more forced to pay higher rate tax. It means the government would be giving with one hand and taking away with the other.”


Commenting on the NICs Budget news, Lindsay James, investment strategist at Quilter Investors said that the 2p cut in NICs comes a cost of £10 billion, with cuts to income tax likely to be unaffordable.

“This would limit the scope of any further cuts given the estimated £13bn of headroom the Chancellor has to play with.

“While this cut would be welcome news to hard-pressed taxpayers, in the context of frozen tax thresholds and other planned tax rises in the years ahead in areas such as stamp duty land tax, the tax burden is still on track to exceed all-time highs. Meanwhile, public services continue to be a source of frustration for much of the electorate.


A key area of focus today will be the updated OBR forecasts, particularly in light of the recent falls in both inflation and growth. With spending headroom having been created largely due to falling interest rates over the forecast period, this may be an early sign of light at the end of the tunnel. Whether this can come in time to limit electoral damage for the Conservatives remains to be seen, but with talk of a May election date, today’s budget seems unlikely to have much impact on existing polls even if, for now at least, there is a small benefit for our wallets.”

Commenting on the National Insurance Cuts: Glenn Collins, head of technical and strategic engagement at ACCA said:

“The November 2023 cut to National insurance at 2p to the pound was a somewhat surprising move for the Chancellor. Now, we have seen further cuts to National Insurance/income tax, at an additional 2p cut.


While tax cuts are welcome relief to the pay packets of many, given that the tax burden in the UK remains so high and is on course to only climb higher, any cuts now will only have a minimal effect on the overall issues of the cost of living crisis and the drop in real-terms wages with the pressures of inflation.”

ACCA calls on the Chancellor to look at raising the personal allowance threshold, a move which would potentially put far more cash back into the pockets of the people over a 2p tax cut. Raising personal allowance thresholds would also reduce the risk of fiscal drag for the lowest earners, and could encourage more people into work as a result.”

On a national insurance cut, Victoria Price, Managing Director at Alvarez & Marsal Tax said: “At a time when he’s not been dealt the best hand, the chancellor is trying to turn a lemon into lemonade by taking the bold decision to reduce national insurance by 2%, despite the hefty price tag.


This will benefit working people, but there is little else he can achieve with such limited headroom. By committing to one cut with such a large price tag, he’s betting the Tory house that this will be a hit with voters.”  

Laura Suter, director of personal finance at AJ Bell, shares her analysis and reaction to the cut in NICs by a further 2% at the Budget saying:

” Opting for National Insurance cuts over income tax cuts offers a double-whammy as it is both cheaper and is targeted at workers, as National Insurance isn’t paid by those over state pension age.

“The move will also help to quell some of the claims of generational unfairness as those on the state pension are likely to be handed another meaty increase through the triple-lock. As Jeremy Hunt has already made cuts to National Insurance, he could also point to the overall tax saving for individuals from the combined cuts – offering up a juicier headline to win over voters.

“The starter rate for National Insurance is charged on the band of earnings between £12,570 and £50,270. Cutting the starter rate from the current 10% down to 8% would save employed people earning £35,000 a total of £448.60 a year. For lower earners the saving is smaller, as less of their income falls in the band liable for National Insurance. But for higher earners there’s the potential to save up to £754 a year. If the chancellor instead opts to cut the starter rate for NI by just one percentage point to 9% the savings would be around half: at £124.30 a year for someone on £25,000 up to £377 a year for the highest earners. 

“But coupled with the changes already made in the Autumn Statement, combined the moves would save up to £1,508 a year for those earning £50,270 or more. For a more average earner on £35,000 a year the combined changes would still mean a saving of almost £900 a year.”

National Insurance savings
SalaryAnnual saving now by cutting starter rate to 9%Annual saving now by cutting starter rate to 8%Savings since pre-Autumn Statement if starter rate is cut to 8%
Source: AJ Bell. First two scenarios based on thresholds for NI remaining the same but the starter rate dropping from the current 10% to 9% and 8%. Third scenario based on difference between the starter rate at 12% and at the rumoured 8%.

Tom Minnikin, partner at Forbes Dawson, said:

“The decision to cut National Insurance will result in mixed reactions amongst the general public, many of whom were hoping for a cut in the basic rate of income tax.

“For employed earners on an average salary of around £35,000, the cut is worth approximately £450, and is on top of an identical rate reduction last November.

“However, the measure does nothing to benefit pensioners and those that earn a living from renting properties, who generally do not pay National Insurance.

“It is also a further blow for company owners, who typically remunerate themselves via dividends as opposed to salary, and who also will not benefit from the changes. There was also no reduction in the rate of employers’ National Insurance.

“These changes, combined with the impact of the 25 per cent corporation tax rate, mean that small business owners choosing to remunerate themselves via dividends will pay a higher effective tax rate on extracting profits than their employees pay on their salaries at higher income levels. This seems illogical at a time when the Government should be seeking to promote entrepreneurship.”

Justin Corliss, technical manager at Royal London, said

“With NI rates consistent across the UK, a second reduction in a matter of months is an obvious way for the Government to reach all of those in employment, in particular lower earners.

“This will obviously not be as popular a decision among pensioners as income tax cuts may have been, as only those who are working and under State Pension age pay National Insurance.

“While salary sacrifice to maximise pension contributions will remain very tax efficient, the changes in NI may reduce the amount going into pensions.”

Katharine Arthur, Partner, haysmacintyre, commented:

The further 2p cut to National Insurance will be welcomed as a less expensive alternative to cutting income tax that still offers those in work a meaningful saving. However, income tax thresholds remain frozen, reducing the real impact of the national insurance cuts.

The abolition of the non-dom regime may help pay for the NIC cuts, but signals a major change to our tax system.  The introduction of a new residence-based relief for new arrivals to the UK from April 2025, with no UK tax on overseas income gains for the first 4 years, should simplify the regime but significantly reduces the timeframe over which individuals will benefit. Will longer term “non-doms” leave the UK? 

That said, the spectre of a general election looms large over this budget and there is no guarantee that the Conservative Party will be in power long enough to actually implement the policies announced today. That uncertainty is a political reality, but it doesn’t make it any easier to work around.”

Gianpaolo Mantini, Chartered Financial Planner at Saltus said that NI cut rewards work commenting- The 2p cut to National Insurance – when added to January’s 2p reduction – brings the rate down to 8% and results in c£900pa each for the employed. This very much rewards work and perhaps starts to genuinely help with the pervasively and persistent high level of inflation.”

Paul Pritchard, Senior Managing Director in FTI Consulting’s UK Tax practice, comments:

“It’s disappointing that the Chancellor has chosen to focus on reducing NIC rather than address the high marginal income tax rates which exist to disincentivise employees and impede economic growth. Whilst the Chancellor has announced his intention to address the inequality of the high income benefit charge there remains the 60% marginal income tax rate where an individual’s personal allowance is clawed back once their income exceeds £100,000.”

Chris Rudden, wealth management expert at digital wealth manager Moneyfarm said: 

“Whilst expected, the 2% cut in NI will be warmly received. This is a great measure for putting more money into workers pockets and allowing them more freedom to either spend, save or invest. However, one thing to be cautious about is that the National Insurance has traditionally funded the state pension. With recent scrutiny on the size of state pension spending and now the reduction in funding, this raises further questions about its sustainability. As a result we continue to call for individuals to make more personal contributions to take greater control over their financial future and ensure they have the retirement they deserve.” 

Self-employed: Class 4 National Insurance savings
SalaryAnnual saving by cutting the rate from 8% to 7%Annual savings since pre-Autumn Statement if rate is cut to 7%
Source: AJ Bell. Based on thresholds for Class 4 NI remaining the same but the rate dropping from the current 8% to 7%. Figures do not account for cost saving through abolition of Class 2 NI.

Lily Megson, Policy Director at My Pension Expert, said: “There will be millions of people across the UK celebrating the NI cuts. Around 27 million of them, in fact. However, the savings are modest – the average UK salary is around £28,000, and someone earning that much stands to save less than £350 a year by cutting NI rates by 2p. And we mustn’t forget that the impact of the NI cuts are limited to those in work. Pensioners still fall through the cracks. 
“Cutting income tax would have cast a much wider net and ensured that pensioners (who pay income on their pensions in retirement) also benefitted from a savings boost. Once again, we must ask ourselves, why has the government taken a limited approach in a move that sacrifices the potential to help millions more people achieve a financially secure retirement? Given the party is lagging behind in the polls and Hunt needs policies that appeal to as many voters as possible, choosing NI cuts over income tax cuts seems a misstep.”

Andy Mielczarek, founder and CEO of SmartSave, a Chetwood Financial company, said: “Cutting NI will be celebrated, but we cannot escape the limited effect it will have. Someone on a salary of £30,000 will only get an extra £348 in their pocket annually thanks to the change, which will do little to reverse the impact of rampaging energy bills, food prices and living costs over the past two years.

“We should not be overly critical; the Chancellor does not have a bottomless pot of funds to allow for huge sweeping tax cuts. Instead, though, it would have been good to see a greater focus on policies and reforms that could empower people to effectively save, invest, and achieve their financial goals.

“Steps need to be taken to simplify and incentivise savings. There is also a pressing need for better education and support when it comes to financial planning, helping people to better assess the wide variety of savings products and providers available to them. Tax cuts need to be bolstered by greater investment into schemes that protect and serve consumers as they make financial decisions.”

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