This week, it was leaked that Chancellor Hunt is considering a 1% reduction in National Insurance Contributions (NICs) as part of his Spring Budget Statement next week.
Sam Dewes, Tax Partner at HW Fisher has being doing some calculations on what a 1% reduction in NICs would look like on someone’s payslip. For instance, someone on £35k would potentially save £224.30 and anyone above £50,270 could save £377. This does assume that the thresholds stay the same however.
Commenting on the idea of a 1% cut to NICs, Sam Dewes, Tax Partner at HW Fisher said: “The proposed reduction of employee National Insurance (NICs) to 9% would close the gap between rates paid by employees and the self-employed to just 1% if there is no change to the self-employed NI rates. It appears the Chancellor has limited room for broader tax give-aways, potentially viewing NI cuts as a more affordable option for the Government by targeting employees only. However, any benefits will be capped for earners above £50,268 unless adjustments are made to the upper NI rate.
“Notably, there’s no mention of reducing the employer’s NI contribution, which remains high at 13.8%. The absence of discussions on increasing allowances and thresholds hints at persistent fiscal drag, which is likely to further increase the overall tax burden which is already at its highest since World War II. Consequently, while some workers may experience reduced NI contributions, the broader tax framework is poised to continue exerting significant pressure on taxpayers.”
Victoria Price, Managing Director at Alvarez & Marsal Tax and leader of the Private Capital Team said: “While we may still see a 1% cut in national insurance, the Chancellor seems to have moved from expectation management to outright expectation extinguishment.
“Hunt’s emphasis on responsibility stems from the Office for Budget Responsibility’s announcement of limited fiscal headroom, estimated to be around £13 billion. While the final revisions from the OBR could give him an opportunity to pull a rabbit out of the hat, as it stands his choices are extremely limited.”
