Get a £330 boost in pay this November as tax increase is scrapped

The original 1.25 percent National Insurance increase took effect last April but Kwasi Kwarteng confirmed in his mini budget that this would be reversed. Initially the reversal was scheduled to take effect in April 2023 but it has been brought forward in an effort to grow the economy and raise living standards.

Chancellor Kwarteng stated, according to The Guardian,

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.

When exactly?

The rise, initially implemented by the previous Chancellor Rishi Sunak to improve social care, will be reversed from 6 November.

The Treasury has stated that most people will receive thetax cutdirectly via their employer’s payroll in their November pay. However some people will have it backdated in December or January, ‘depending on the complexity of their employer’s payroll software’ as reported by GOV.UK

The impact

On average, households can expect to save £330 a year, though it will of course vary depending on income. However savings will look something like this, as calculated by finance specialists Hargreaves Lansdown, reports The Sun:

Income saving

£20,000: £93

£30,000: £218

£40,000: £343

£50,000: £468

£60,000: £593

£80,000: £843

£100,000: £1093

The levy, which has now been cancelled, was expected to raise around £13bn a year to fund social care and deal with the NHS backlog. However, Kwarteng has stated funding for health and social care services would be maintained at the same level as if it were still in place.

Whilst this is ostensibly good news for workers it does raise questions about how sustainable cutting taxes yet maintaining spending is for the UK economy as a whole. This comes at the same time as it was recently announced that the UK has a debt-to-GDP ratio of 100% for the first time in over sixty years.

Sources used:

-The Sun 'Exact amount your pay will rise in November as national insurance rise is scrapped'

- The Guardian'National insurance rise to be reversed from 6 November'

- GOV.UK 'National Insurance increase reversed'

- The Guardian 'Now Britain is in the 100% debt-to-GDP club, what’s the spending plan?'

Read more:

⋙ Living costs are rising: Truss and Sunak propose tax plans that could affect you very differently

⋙ Save £112 on your energy bills with this quick heating adjustment

⋙ Having money anxiety? Here's how to cope