Government Confirms National Insurance Rise Will Be Reversed From November
The Chancellor has confirmed the rise will be reversed from November (Alamy)
2 min read
Chancellor Kwasi Kwarteng has confirmed that the recent rise to National Insurance Contributions is to be reversed from November.
The proposal introduced by former chancellor Rishi Sunak in April is set to be scrapped as part of Prime Minister Liz Truss's commitment to cut taxes ahead of a mini-budget on Friday.
Announcing the change, new Chancellor Kwasi Kwarteng said the 1.25 per cent rise would be reversed from 6 November as he claimed cutting taxes was "crucial" to help the economy grow.
The controversial tax rise was intended to help provide additional funding to health and social care services, but was heavily criticised by opposition parties due to the increase in tax bills for households during a cost of living crisis.
The Treasury has claimed the change will mean almost 28 million people will keep an average of £330 next year, and around 920,000 businesses will save around £10,000 on average due to the reversal.
The rise was originally planned to remain in place until April 2023, when a new Health and Social Care levy set at the same rate was due to be introduced as part of plans to raise £13bn for health services.
But Kwarteng confirmed the levy would also be scrapped, insisting that the expected funding for the NHS would be retained through other funding channels.
In a statement confirming the plans, Kwarteng said: "Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
"Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the Levy will help them grow, whilst also allowing the British public to keep more of what they earn."
Truss had committed to reversing the rise during her leadership campaign, as she promised a significant wave of new tax cuts, which she claimed would help people afford rises in the cost of living.
Kwarteng is widely expected to announce other measures, including a simplification of the income tax regime, during a fiscal event on Friday.
The so-called "mini-budget" will follow today's Bank of England announcement that Britain's interest rates will be raised to their highest level since 2008, and suggested the UK's economy was in a technical recession after they forecast growth would shrink for a second consecutive quarter.
The Bank made the decision to raise the UK's interest rates to 2.25 per cent in response to soaring inflation rates, which are expected to hit 11 per cent in autumn – their highest in 40 years.
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