The Chancellor has announced in his autumn statement on Wednesday that there will be national insurance cuts for the self-employed.
Jeremy Hunt said that the government will now abolish the Class 2 national insurance which is in “recognition” of self-employed companies.
Hunt said, that is a “flat rate compulsory charge, currently £3.45 a week, paid by self-employed people earning more than £12,570 which gives state pension entitlement.”
In cutting the tax the Chancellor said this is “in recognition of the contribution made by self-employed people to our country.”
The Chancellor also announced on Wednesday afternoon that there will be changes to Class 4 national insurance paid by those who are self-employed.
Read more related news:
Chancellor outlines 110 pro-growth measures as back of UK innovation drive
Chancellor retains triple lock pension in his autumn statement
This therefore works out at 9% tax on earning between £12,570 and £50,270 and that from April 2024 this will be reduced to 8%.
Hunt said, “These reforms will save around 2 million self-employed people an average of £350 a year from April.”
Hunt told MPs in the House of Commons, “I said we would cut taxes when we could – but only responsibly and only in a way that did not fuel inflation.”
Hunt also said that 27 million pay 13% national insurance which works out to be a 32% marginal rate of tax.
He said, “If we want people to get up early in the morning, if we want people to work nights, if we want an economy where people go the extra mile and work hard then we need to recognise that their hard work benefits all of us.”
So national insurance will be cut from 12% to 10%, Hunt added, “It means someone on the average salary of £35,000 will save over £450.
“For the average nurse, it is a saving of over £520 and for the typical police officer it is a saving of over £630 every single year.”
Mohsin Rashid, CEO of ZIPZERO, said, “All the National Insurance cuts in the world will still fall short of rebuilding the pile of rubble that millions of Britons’ finances have been left in after years of fiscal chaos.
“Hunt’s priorities are understandable – he has to paint a picture of long-term economic prosperity – but his focus was also misguided. It’s all very well for him to pat himself on the back for introducing policies that will put more money in people’s pockets in the long-term, and may eventually contribute to restoring economic stability (providing of course that they don’t spike inflation). But where is the relief that is so sorely needed by those still struggling to put clothes on their backs and food on the table?
“The cost-of-living crisis is far from over – bolstering immediate, short-term support like energy bill relief and cost-of-living payments was crucial but did not materialise.
“Meanwhile, it is plain to see that these cuts predominantly benefit those whose pockets are already well-lined.
“Time and time again, the people who truly need support – lower income households – are left to fend for themselves by Hunt’s wanting fiscal policies, while he turns a blind eye in the name of ‘growth’.”
