TAX CUT
How a 2p cut to National Insurance would affect your wages – will you get a pay rise?
Watch our video above on how National Insurance works
RISHI Sunak has pledged to cut taxes as he unveiled his Conservative Party election manifesto this morning.
The Prime Minister's offer includes a flagship cut to National Insurance (NI) by a further 2p.
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If elected, the government would slash the main rate of primary Class 1 NI contributions (NICs) from 8% to 6% by 2027.
The Treasury has already cut Class 1 NICs twice this year, from 12% to 10% in January and down to 8% in April, as part of its long-term plan to abolish the tax entirely.
It means a worker with an average annual salary of £35,000 will be £449 a year better off.
In total, 29million workers will see their pay rise go up if the policy was to be greenlit.
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The Prime Minister also confirmed plans to abolish the main rate of National Insurance for the self-employed.
Known as Class 4 NICs, these are paid by the self-employed whose businesses turn a profit of £12,570 or more a year.
If elected, the government is committed to axing Class 4 NICs by the end of the next Parliament.
It comes as Rishi Sunak has also pledged to abolish stamp duty for first-time buyers, with up to 200,000 Brits set to benefit.
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Mr Sunak’s manifesto includes pledges to
- PROTECT pensioners from ever paying income tax with a new Triple Lock Plus
- GIVE working parents 30 hours a week free childcare by September next year
- CREATE a mandatory new form of national service for 18-year-olds
- IMPOSE a ban on any new green levies that makes Brits pay for Net Zero
- BAN mobile phones in classrooms as well as clamping down on sex education
- BOOSTING defence spending to 2.5 per cent of GDP by 2030
- SLAP an annual cap on legal migration while pledging immediate Rwanda flights
- CUT stamp duty on houses for first time buyers up to £425,000
Harry Cole reacts to the Conservative election manifesto
Follow our live blog on the Conservative Party's manifesto launch to find out what else has been confirmed.
RABBIT IN THE HAT
Analysis by Ryan Sabey, The Sun's Deputy Political Editor:
Rishi Sunak managed to pull one rabbit out of the hat and it will be to the delight of the self-employed to create a nation of enterprise.
The move will double down on his key message of being on the side of working people - insisting it's not right to tax workers twice.
He also launched a blistering attack on Sir Keir Starmer labelling him a socialist - saying he will keep more of the public's money.
The PM even invoked a famous line from the Brad Pitt film Fight Club.
He said: "The first rule of Labour’s tax rises is that you don’t talk about tax rises.”
He also revealed that he wouldn't put "security and family finances" at risk in the face of eco-zealotry.
There was help for first-time buyers and pensioners as he attempted to win back support from across the ages.
There was a lot of time spent on Tory forecasts that Labour would hike taxes up by £2,094 for households - saying if you're not sure about Labour's plans "don't vote for it".
Will this move the dial?
He can only hope that he can begin to claw back some support in the face of an all-out assault by Labour, Reform and the Lib Dems.
How much better off will I be?
How much better off you'll be after another 2p cut to NICs depends on how much you earn.
Data from Quilter recently shared with The Sun shows what workers on specific salaries will see their pay rise to.
For example, a worker on £25,000 a year will see their income boosted by £249 a year.
Meanwhile, someone on an annual salary of £50,000 will see their pay go up by £749 a year.
However, those earning below £12,570 a year won't be affected.
This is because you don't pay any NI if your income is set below this level.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "An NI cut would offer a tax break to hard-pressed workers, but they would still be squeezed horribly by the frozen tax thresholds.
"It means that as people's pay rises, they automatically pay more income tax, and risk being pushed into a higher tax bracket.
"Already 2.1million people have been dragged into paying income tax because of it.
"Another NI cut would bring down the rate of tax they pay but doesn't unwind the fact they’re paying this tax in the first place.
"It means that even while there’s all this talk of tax cuts, there’s every chance you could end up handing over more of your income to the taxman in future."
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you're self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
That means you get some of the National Insurance contributions (NIC) you put in back.
You'll usually pay National Insurance Contributions (NICs) when you're over the age of 16 and earning a certain amount.
There are different types of National Insurance, known as "classes," and the type you pay depends on your employment status, how much you earn, and whether your record has any gaps.
NICs are usually taken automatically by your employer and paid to HMRC, so you don't need to do anything.
You can see how much NICs you pay on your wage slip.
However, self-employed workers usually have to pay NI themselves when completing a self-assessment tax return.
The abolition of Class 4 NICs for the self-employed would mean that these workers no longer get taxes on their profits.
Currently, if your profits are more than £12,570 a year, you must pay Class 4 NICs.
For tax year 2024 to 2025 it means you'll have to pay:
- 6% on profits between £12,570 and £50,270
- 2% on profits over £50,270
How have National Insurance rates changed?
The threshold for National Insurance payments is currently £12,570 a year for employed workers and £6,725 for self-employed people.
A change in April 2022 saw millions of workers paying 1.25% more NI, but that hike was reversed from November of the same year, saving workers £330 a year on average.
Rates fell from 13.25% to 12%.
The Treasury then cut the same rate of NICs from 12% to 10% in January 2024 following an announcement in the 2023 Autumn Statement.
In April 2024, the Government slashed the main rate of Class 1 NICs from 10% to 8%.
Most people now pay 8% NICs on any earnings between £242 and £967 a week (or £1,048 to £4,189 a month).
You also have to pay 2% on anything you earn over £967 a week (or £4,189 per month).
Those earning less than these amounts do not have to pay any National Insurance.
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Of course, the exact amount you pay will depend on how much you earn, as it's a percentage of earnings between these amounts.
If you're employed, the company you work for deducts the tax and pays it to HMRC for you.
How do I check how much National Insurance I've paid?
YOU can check how much National Insurance you've paid by visiting www.gov.uk/check-national-insurance-record.
You will need a login and password to do this.
If you do not have a login to the Government Gateway portal, you can set one up, but will need your National Insurance number to do so.
You can check how much you have made in contributions during the current financial year, and check how many National Insurance credits you have received.
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