Today the Government have introduced the Health and Social Care Levy (Repeal) Bill.
This Bill delivers the Prime Minister’s promise to reverse the temporary 1.25 percentage point increase in national insurance rates from 6 November and will cancel the levy coming in as a separate tax from April 2023.
In cancelling the tax rise for employees, the self-employed and employers, the Government are acting to support individuals with the cost of living by allowing them to keep more of what they earn, as well as to support businesses to pursue growth, innovate and invest.
This will be an average tax cut of around £135 for workers this year and around £330 next year. Taking into account the increase to national insurance contributions thresholds at the spring statement and the levy reversal, almost 30 million people will be better off by an average of over £500 in 2023-24.
Around 60% of businesses with NICs liabilities will see a reduction in their NICs bill, with 20,000 of these businesses being taken out of paying NICs entirely due to the combination of this measure and the employment allowance. The average savings for businesses will be £9,600 for the 2023-24 tax year.
The Government are implementing the change as soon as possible, to maximise the cash benefit for people and businesses this year. Most employees will receive a cut to their national insurance directly via payroll in their November pay.
The self-employed will pay NICs at 9.73% on earnings between £11,909 and £50,270 per annum. The blended figure is equivalent to seven months at the higher rate 10.25% and the remainder at 9%
While the tax rise will be cancelled, funding for health and social care services will be maintained as planned. The additional funding used to replace the expected revenue from the levy will come from general taxation. The Government remain committed to ensuring fiscal discipline over the medium term.