National Insurance increase reversed

National Insurance increase reversed

The Government’s reversal of the National Insurance contribution (NICs) increase is now in effect as of 6 November.

The majority of working people will begin receiving the 1.25% tax cut in their payslips from November onwards.

The rise in NICs was introduced in April as part of the health and social care levy but was reversed by previous Chancellor Kwasi Kwarteng in the September mini-budget.

The Government had originally planned to use the £12.4 billion it predicted to raise through the levy to reform the social care system and reduce the backlog in the health service.

However, despite the tax cut, the Government has indicated the same levels of funding for the health and social care services will be maintained.

The reversal follows a rise in NI thresholds in July, which, in tandem with the cut to National Insurance rates, will save around 30 million people an average of £500 in 2023, according to HMRC. However, some people may not benefit immediately from the reduction if their employers cannot update payroll processes in time.

These employees are expected to receive the tax cut by February 2023 and should benefit retrospectively once updates are applied.

Speaking on the policy’s effects on business, HMRC said:

“Businesses who currently have NICs liabilities will pay less, allowing them greater scope to invest in their businesses and supporting the overall growth of the economy.”

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