Chancellor Kwasi Kwarteng announced that the increase in National Insurance in April will be canceled on 6 November 2022.
The 1.25% increase was introduced under former Chancellor Rishi Sunak, but during the Tory race for leadership Liz Truss promised to change that. Mr. Kwarteng announced Friday ahead of the "mini-budget". He said, “Taxing our path to prosperity has never worked. To improve everyone's standard of living, we must be uncompromising in our economic development. Tax reduction is crucial in this regard.”
The Treasury said most employees will receive a National Insurance Contribution directly from their employer's payroll reduced in their paychecks in November, although some may be deferred until December or January. They have calculated that nearly 28 million people will save an average of £330 next year, while 920,000 businesses will save an average of nearly £10,000 next year from this change.
In a tweet, Kwarteng called it "tax cuts for employees". The tax increase was introduced to clear NHS backlogs and fund improvements in National Insurance. This would bring in about £13 billion a year. However, Truss argued that her party had wrongly violated the 2019 manifesto's commitment not to raise taxes, saying the additional funding could come from general taxes.
The Chancellor confirmed today that funding for health and social care services will be kept at the same level as if a fee had been applied. MPs are expected to vote for the abolition of the health and social care levy once they return from party conferences in October.
Downing Street said the waiver bill is part of the government's commitment to a "low-tax, high-growth" economy. "This is a tribute to the commitment made by the Prime Minister during the (Tory leaders) campaign," spokeswoman said.
The move comes ahead of Chancellor Kwarteng's "fiscal event" on Friday, when he will provide more details about the government's plans to cut taxes, including reversing a planned corporate tax hike.
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