Cuts to National Insurance (NI) will be introduced on Saturday, saving the average worker £447.86 over the next year.
This works out at £8.61 per week for those earning the UK’s average salary of £34,963, although the exact figure saved will depend on how much a person earns.
The 2p cut to NI was introduced in the November Autumn Statement, along with a host of other financial measures.
The main rate of class 1 NI contributions will fall from 12% to 10% on 6 January, saving millions of workers money. Anyone aged 16 and over who earns at least £242 a week must pay NI contributions and this money goes towards funding public services like the NHS.
How will National Insurance cut affect you?
But how much money will you save following this weekend’s cuts? Experts at Quilter have analysed a range of pay rates to calculate how the cut to NI will impact workers.
Someone earning £30,000 a year will save £348.60, while anyone earning £100,000 will see a significantly bigger saving of £754.
A worker earning £40,000 will save £548.60, while those earning £50,000 will save an average of £748.60.
Yet while the savings are good news, when combined with frozen income tax thresholds, the amounts are far lower.
Income tax thresholds are currently frozen until 2028, including the personal allowance – the amount each worker can earn before they pay tax – which has remained at £12,570 since 2021.
The research from Quilter suggests that if frozen income tax bands had increased by just 2% in the last four years, a worker on the average full-time salary would be £308.40 better off. When this amount is taken off the average saving from this week’s NI cut, the average UK worker will in fact be just £2.68 a week, or £139.46 a year, better off.
Separate research has also claimed that freezing thresholds is costing the average worker £2,645 a year and is set to net the government £52bn a year by 2027.
2p cut is ‘hardly life changing’
Rachael Griffin, tax and financial planning expert at Quilter, said: “The Chancellor’s 2p cut to National Insurance was the big ‘rabbit out of the hat’ moment at the Autumn Statement, providing UK workers with some long-awaited respite via a boost to their monthly take home pay from this month.
“However, while a £447.86 yearly top up for the average worker will be welcomed, it will hardly be life changing.
“Getting more money into people’s pockets is key, and thawing the frozen income tax thresholds could help considerably. With an election rapidly approaching, the Spring Budget will likely be the Chancellor’s final opportunity to make any vote swaying announcements and income tax is widely rumoured as being top of the agenda to curry favour with voters – particularly younger cohorts.”
