UK workers have been promised yet another National Insurance tax cut if the Conservatives are re-elected.
Chancellor Jeremy Hunt has already cut National Insurance (NI) twice this year and the Tory general election manifesto, published today, pledges another 2p reduction.
This would reduce the NI rate for workers from 8% to 6%, having already been cut from 12% to 10% in January and to its current level in April.
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The Conservative Party remains behind Labour in the polls so there is no guarantee of this reduction.
Labour has said it won't match this cut in its general election tax plans.
But under the Tory proposals, someone earning £50,000 could be £749 better off with a 2p NI reduction.
“Whether this turns the dial enough for a party that is lagging badly behind in the opinion polls is yet to be seen,” says Shaun Moore, tax and financial planning expert at Quilter.
“This may be a case of too little, too late. The reality is that many people are looking to the difficulties that public services are facing at the moment and wondering how such a tax cut like this will impact the NHS, schooling and other state support.
“Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society if the party has the chance to enact it.”
How much could you save from another National Insurance rate cut?
Employees age 16 or over have to pay Class 1 NI once they start earning more than £242 a week from one job or are self-employed and making a profit of more than £12,570 a year.
The rate was cut from 12% to 10% in January following Hunt’s Autumn Statement and to 8% in April after the Spring Budget.
The Tory manifesto pledges to reduce NI by another 2p to 6%.
The savings will depend on how much you earn.
Someone on around the average salary in the UK of £35,000 will be £448 better off per year, according to analysis by Hargreaves Lansdown, rising to £754 once you earn more than £55,000.
| Pay | NI now (8%) | NI with 2% cut (6%) | Saving |
|---|---|---|---|
| £12,000 | 0 | 0 | 0 |
| £15,000 | £194 | £146 | £48 |
| £20,000 | £594 | £446 | £148 |
| £25,000 | £994 | £746 | £248 |
| £30,000 | £1,394 | £1,046 | £348 |
| £35,000 | £1,794 | £1,346 | £448 |
| £40,000 | £2,194 | £1,646 | £548 |
| £45,000 | £2,594 | £1,946 | £648 |
| £50,000 | £2,994 | £2,246 | £748 |
| £55,000 | £3,111 | £2,357 | £754 |
| £60,000 | £3,211 | £2,457 | £754 |
| £65,000 | £3,311 | £2,557 | £754 |
| £70,000 | £3,411 | £2,657 | £754 |
| £75,000 | £3,511 | £2,757 | £754 |
However, Sarah Coles, head of personal finance at Hargreaves Lansdown, highlights that these savings could be offset by frozen tax thresholds, pushing more people into higher tax brackets through fiscal drag.
“There is no pledge to reverse the freeze either from the Conservatives or any other party,” she says.
Moore adds that cutting NI doesn’t help those receiving the state pension as they don’t pay the tax, although the Tories have pledged to increase this group's personal allowance.
“The Conservatives will be hoping that the triple lock plus policy, which pledges not to tax the state pension, gives pensioners enough to stop them feeling hard done by,” he says.
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