JUST THE BUSINESS, TAX CUT FOR 31M WORKERS
Staff will enjoy extra £ 100 a year thanks to NI changes
TAX cuts that will save 31 million workers around £ 100 will come into force next month, the Chancellor confirmed yesterday.
Rishi Sunak said his plan for prosperity “starts immediately by putting more money in people’s pockets”.
He used the Budget to meet election pledges to cut the cost of living and leave employees with more of their wages. Mr Sunak announced the national insurance contributions ( NICS) threshold will increase from £ 8,632 to £ 9,500 in April.
It means an average employee will save about £ 104 a year while self- employed workers, who pay a lower rate, will benefit from a £ 78 reduction.
The Government wants to increase the point when employees start paying contributions to £ 12,500 within five years.
By 2024 the National Living Wage, which is pegged to median
idl earnings, is set to reach more than £ 10.50 an hour.
Around two million workers on the minimum rate will benefit from a 6.2 per rise next month, almost £ 1,000 a year for a fulltime employee, the biggest rise ever.
Mr Sunak told MPs the Conservatives were the “real workers party”. He added: “We promised to end low pay – we’re getting it done. And as people earn more – we’ll also cut taxes on their wages.
“I am increasing, in just four weeks’ time, the national insurance threshold from £ 8,632 to £ 9,500.
“That’s a tax cut for 31 million people, saving a typical employee £ 104. And taken together, our changes to the National Living Wage, income tax, and now national insurance mean that someone working full time on the minimum wage will be more than £ 5,200 better off than in 2010.”
Ben Willmott, of the Chartered Institute of Personnel and Development, said: “It’s good to see the threshold rising for NICs as it means people will be able to keep more of their pay without their entitlements being affected, like the state pension.
“However, given that the NIC threshold is now edging closer to the income tax threshold, it does beg the question if the two should merge to create a simpler system.”
Claire Ainsley, of the Joseph Rowntree Foundation think tank, said: “This Budget was a strong start. But the rise in the National Living Wage by 2024 must be followed up with ambitious plans for skills, jobs, social security and housing if the Government is to show that it is serious about breaking poverty’s grip on families.”
Mr Sunak was delivering the first Budget setting the course for the UK outside the constraints of Brussels in nearly 50 years.
He also confirmed that he will abolish the tampon tax “now we’ve left the EU”. Brussels red tape meant the UK could not ditch the five per cent levy on sanitary products but from January they will be exempt from VAT.
The changes cannot be introduced straightaway because the UK continues to follow EU rules until the Brexit transition period ends in December.
Scrapping the unpopular tax will save the average woman around £ 40 over their lifetime, with a tax cut of 7p on a pack of 20 tampons and 5p on a pack of 12 pads.
Campaigners have called for tampons to be exempt from taxes, claiming the levy contributes to the “period poverty” that makes it difficult for women on low incomes to access the products they need. Rose Caldwell, of charity Plan International UK, said: “The scrapping of the tampon tax is a landmark moment in the fight against period poverty.”
The Government is also freezing fuel duty as well as all alcohol duties and making it easier for parents to access tax- free childcare.