As the new tax year unfolds, millions of workers across the UK are set to benefit from a significant National Insurance cut, while families receiving Child Benefit will see their payments increase. The Government’s latest financial adjustments aim to alleviate the cost of living and reward hard work amid ongoing economic challenges.
The main rate of employee National Insurance has been reduced by 2% from 10% to 8%, marking the second such cut in the last six months. This follows a previous reduction from 12% to 10% announced in last year’s autumn statement. Together, these cuts are expected to save the average worker earning £35,400 over £900 annually.
Prime Minister Rishi Sunak highlighted the economic progress that has allowed for such tax cuts, stating, “Hard work is one of my core values, and the progress we have made on the economy means we can reward work with a tax cut worth £900 for the average earner. This marks the next step in our plan to end the unfairness of double taxation of work by abolishing national insurance in the long term.
However, the Shadow Chancellor, Rachel Reeves, criticized the Government’s approach, accusing it of misleading the public by “giving with one hand and taking with another.” Reeves pointed out that despite the National Insurance reductions, other fiscal mechanisms, such as frozen income tax bands, could serve as a “stealth tax,” incrementally pulling workers into higher tax brackets as their salaries increase.
In addition to the National Insurance cuts, Child Benefit payments will see an uplift. HMRC has confirmed that families with one child will now receive £1,331 per year, an increase of more than £83, with £881 per year for each additional child, marking an annual rise of £54.60. Furthermore, the High Income Child Benefit Charge (HICBC) threshold has been raised. Families with the highest earners bringing in up to £60,000 annually will no longer be subject to the HICBC, expanding the support to more families.
Laura Trott, Chief Secretary to the Treasury, emphasized the Government’s efforts to address the unfairness in the child benefit system, stating, “As a result, 170,000 families will no longer have to pay back child benefit, and nearly half a million families will save an average of around £1,300 next year.”
These financial adjustments come at a critical time as the UK continues to navigate the economic repercussions of the pandemic and geopolitical tensions. With the aim of bolstering the economy and providing much-needed relief to workers and families, the Government’s latest measures are a step towards alleviating financial pressures and supporting the nation’s recovery.
