Bill to cut National Insurance for 28 million people enters final stages in Commons today

• The Bill to reverse April 2022’s rise in National Insurance and cancel the Health and Social Care Levy will pass through the House of Commons this afternoon.
• Reversal takes effect on 6 November and means an average tax cut of £330 a year.
• Announced as part of the Chancellor’s Growth Plan, repeal delivers on PM pledge to cut tax burden and promote economic growth.

The Bill to both reverse the 1.25 percentage point rise in National Insurance, and to cancel next year’s Health and Social Care Levy, will enter its final stages in the House of Commons today, before moving to the House of Lords.

Announced as part of the Chancellor’s Growth Plan, the cancellation of the tax rises marks a milestone in the Prime Minister’s pledge to cut tax burden to allow people to keep more of what they earn and drive economic growth. The reversal of the National Insurance increase takes effect from 6 November.

Scrapping the rise will 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 and can now invest the money as they choose. Almost 28 million people across the UK will be able keep more of what they earn. This is worth an extra £330 on average in 2023-24, with an additional saving of around £135 on average this financial year.

Chancellor of the Exchequer Kwasi Kwarteng said:

“Reversing the National Insurance rise is a promise delivered. It means an average saving of £330 a year for 28 million workers in the UK, and I’m delighted we will get a step closer to this today as the Bill passes through the Commons.

“Today marks a crucial moment in our mission to cut tax and boost growth – which will raise the living standards for everyone in the UK.”

Following Treasury questions, the Health and Social Care Levy (Repeal) Bill will have its remaining House of Commons stages this afternoon.

The previous government decided to raise National Insurance by 1.25 percentage points in April 2022 to fund health and social care. The rate was due to return to 2021-22 levels in April 2023, when a separate new 1.25% Health and Social Care Levy was due to take effect. Today’s Bill reverses the rise from earlier this year and cancels next year’s introduction of the Levy.

This cut is part of the Chancellor’s Growth Plan announced on 23 September, where next year’s corporation tax rise was cancelled, stamp duty was cut and April 2024’s 1p cut to the basic rate of income tax was brought forward to April 2023. In his Growth Plan speech, the Chancellor also set the ambitious target for 2.5% trend of growth whilst securing sustainable funding for public services. The pro-growth agenda backs business to invest, innovate and create jobs, helping raise living standards for everyone across the UK as the economy grows.

920,000 businesses will see a cut in National Insurance bills, with 20,000 taken out of paying National Insurance entirely due to the Employment Allowance, which rose in April 2022 from £4,000 to £5,000.

In particular, many small and medium businesses (SMEs) – who employ over 13 million people in the UK – will see a cut to their National Insurance bills. Next year this will be worth £4,200 on average for small businesses and £21,700 for medium sized firms who pay National Insurance. In total 905,000 micro, small and medium businesses will benefit from 2023-24.

National Insurance thresholds increased in July 2022 to lift 2.2 million of the lowest earners in the UK out of paying the tax. The Chancellor has committed to retaining the level of these thresholds to support families. Taken together, the higher thresholds and the Levy reversal mean that almost 30 million people will be better off by an average of over £500 in 2023-24.

With immediate action pledged by the Prime Minister to maximise the cash benefit for people and businesses this year, the legislation means that government can implement the changes as soon as possible. Most employees will receive a cut to their National Insurance directly via payroll in their November pay, with some receiving it in December or January, depending on the complexity of their employer’s payroll software.

Also as part of the Chancellor’s Growth Plan, the Chancellor reversed the 1.25 percentage point increase to income tax on dividends announced alongside the Levy from April 2023. Those who pay tax on dividends will save an average of £345 next year. The reversal of the ‘dividend tax’ rise signals renewed support for entrepreneurs and investors as part of the government’s drive to grow the economy and improve the standard of life for families across the UK.

Overall funding for health and social care services will be maintained at the same level as if the Levy were in place, and the government will be doing this without a tax increase. The additional funding used to replace the expected revenue from the Levy will come from general taxation. The Chancellor is committed to reducing debt-to-GDP ratio over the medium-term and boosting growth, which will help sustainably fund public services.