National Insurance: How will the National Insurance cut affect me? Will the National Insurance cut apply in Scotland?
Chancellor Jeremy Hunt has announced a 2p cut to National Insurance in setting out his Spring Budget on Wednesday.
He said the Budget would help families with “permanent” tax cuts – but Labour said reductions would be cancelled out by the government’s previous decision to freeze the threshold people start paying tax.
Advertisement
Hide AdAdvertisement
Hide AdBut what exactly is National Insurance, and how does the cut affect you? We take a look ahead of the Budget statement.
What is National Insurance?
National Insurance contributions are paid by employees and the self-employed on their earnings, as well as employers, and the amount paid depends on an individual’s salary.
Employees currently pay 10 per cent of their earnings over £12,570 towards National Insurance, following a cut in January. They also pay 2 per cent on income over £50,270.
Self-employed people pay 9 per cent of earnings over £12,570, and from April this will be reduced to 8 per cent.
How much will the National Insurance cut save me?
The 2p cut to National Insurance announced on Wednesday will save:
- £148.60 on a £20,000 salary
- £348.60 on a £30,000 salary
- £748.60 on a £50,000 salary
- £754 on a £75,000 salary
- £754 on a £100,0000 salary
How much will the National Insurance cut cost the government?
A 2p cut to National Insurance will cost the Treasury £9 billion.
Has income tax also been cut?
In short, no. There were some reports this morning the Budget could also include a cut to income tax. The Resolution Foundation had estimated cutting income tax by just 1p would cost the Treasury £7bn this year, but no cut transpired.
Cutting National Insurance is cheaper than cutting income tax as it only applies to earned income and will therefore benefit fewer people.
Get the inside track on what’s happening in the world of Scottish politics with our daily newsletter
Advertisement
Hide AdAdvertisement
Hide AdFor example, pensioners or those who receive income from investments such as property would not be impacted by a cut to National Insurance.
Does the National Insurance cut apply in Scotland?
Yes – National Insurance is reserved to Westminster, so automatically applies to Scottish taxpayers.
This is not the case for income tax, which is partially devolved as the Scottish Government is able to set rates and bands. For most Scots, an announcement on income tax would not have made any difference.
Will any cut help the Conservatives at the next general election?
Unlikely – many Conservative MPs worry National Insurance is not as easy for voters to understand, and therefore could have little impact at the ballot box.
Comments
Want to join the conversation? Please or to comment on this article.