07 March 2024 , 09:49
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Martin Lewis says millions of Brits will actually be "worse off" after the National Insurance cut next month.
In the Spring Budget yesterday, Chancellor Jeremy Hunt announced that National Insurance would be cut by 2p from April 6. The Chancellor said the move would benefit around 27million workers with the average person saving £450. This is the second National Insurance cut this year as it was cut from 12% to 10% in January.
However, in a response to the Budget, the MoneySavingExpert.com founder noted that due to the frozen tax bands many would not see the benefit. In a post on the MSE website, Martin explained: "What freezing the threshold does is that it means no matter what you earn, as your earnings increase, a bigger proportion of your earnings goes on tax. And that's how the Chancellor makes money from it."
Martin said those who are earning between £26,000 and £60,000 a year in 2024-25 will "gain more" from the cut than they would lose - this is the only group which looks set to benefit. Those earning between £12,750 - so when National Insurance becomes payable - and £26,000 or over £60,000, the cut is "offset" by the frozen thresholds.
In another X - formerly Twitter - post Martin highlighted that the move would only affect "working people". This means those who live off pensioners or the state pension would not be impacted - or would benefit - at all from the National Insurance cut. You also don't have to pay national insurance on earnings below £12,750 so again this move will not impact this group.
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You can use our National Insurance calculator to find out how much you will save after the tax cut.
Currently, you pay 10% on earnings between £12,570 and £50,270 in Class 1 contributions but this will be reduced to 8% from April 6 and you pay 2% on earnings over £50,270. You also pay National Insurance if you are self employed and start making over £12,570 in profit per year.
If you are self-employed you either pay Class 2 or Class 4 contributions however Class 2 is set to be scrapped next month. Class 4 contributions sit at 9% on profits between £12,570 and £50,270 - but this will be cut to 6% from April. You also pay 2% on profits over £50,270.