Chancellor Jeremy Hunt will announce a surprise cut to National Insurance by 2p in tomorrow's Spring Budget, reports reveal.
In Wednesday’s announcement, the Chancellor will “make National Insurance the central measure” during his Budget speech, claims The Times.
Hunt will reportedly say the average worker will receive £900 extra per year when the policy is coupled with last Autumn’s cut by the same amount.
The cuts are predicted to cost around £10bn per year, and the Government will even speed up the implementation of the 2p cut to ensure it comes into effect in April, the newspaper says.
In the Autumn Statement, the Government opted to cut the starter rate of National Insurance from 12% to 10%. This is the rate charged on the band of earnings between £12,570 and £50,270.
If this policy gets the green light, the main rate of National Insurance would fall from 10% to 8% and would mean an annual saving of £349 for someone earning £30,000. This could rise to £749 for someone earning £50,000 and £754 for higher-rate taxpayers, according to Interactive Investor.
The tax would be one step further than the 1p cut mooted in many Budget rumours this week, and experts believe it could be one last political push to win voters ahead of the general election – as opposed to a risky cut of income tax.
Hunt set to pull ‘tatty-looking ferret’ out of the hat
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “It wouldn’t be 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 would be far better than nothing, but it would be a scaled-down, less attractive option. Jeremy Hunt would just have to hope it didn’t bite.
“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 £10bn, which is more manageable for a Chancellor with shrinking headroom.
Coles added: “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 has decided this is all he can afford to offer right now. The question will be whether it’s enough of a blockbuster tax cut to move the dial on a general election.
“Unfortunately, if NI is cut, it’s 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.”
