Chancellor Kwasi Kwarteng has announced today (22nd September 2022) that the 1.25% increase to National Insurance will be reversed from the 6th November. Continue reading to discover how this will affect businesses and taxpayers.
The 1.25% National Insurance rise to be reversed
The 1.25% National Insurance rise was put in place by former Chancellor Rishi Sunak to help the NHS recover from the coronavirus pandemic. The planned Health & Social Care Levy was also designed to provide vital health and social care funding and was expected to raise around £13 billion a year.
Delivering on the Prime Minister’s pledge to slash taxes to help drive economic growth, scrapping the tax will help almost 28 million people across the UK keep more of what they earn. On average, taxpayers will retain an additional £330 for the 2023-24 tax year, with a further saving of £135 this year. Reversing the National Insurance rise will also reduce tax for 920,000 businesses by nearly £10,000 on average next year as they will no longer pay a higher level of Employer National Insurance.
The new Chancellor, Kwasi Kwarteng, announced a reverse to the 1.25% National Insurance rise from the 6th November ahead of Friday’s mini-budget tomorrow (23rd September 2022). The government will also cancel the Health & Social Care Levy through a Bill introduced today. The Chancellor has confirmed that funding for the health and social care services will be protected and remain at the same level as if the Levy were in place. Instead, the funding will now come from general taxation.
Chancellor Kwasi Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the Levy will help them grow, whilst also allowing the British public to keep more of what they earn.”
The National Insurance threshold increased in July 2022 to lift 2.2 million of the poorest people in the UK from paying the tax. The Chancellor has committed to retaining the National Insurance thresholds, which, alongside the Levy reversal, will mean that almost 30 million people will be better off by an average of £500 in 2023-24.
In addition, the Chancellor is expected to announce in his fiscal event tomorrow that the 1.25% increase in income tax on dividends declared alongside the Levy, and introduced in April 2022, will also be reversed from April 2023.
The reversal of the dividend tax rise will save an average of £345 next year and signals renewed support for investors and entrepreneurs as part of the government’s drive to grow the economy.
Keep an eye on our blog for Friday’s mini-budget key announcements
Friday’s mini-budget is due to be delivered on the 23rd September 2022. Keep an eye on our blog for the key announcements and how this could affect you.
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