The NI cut is worth around £900 to the average worker over the new financial year, but many pensioners will feel left out because they do not benefit. However, they get their own pay rise from Monday, and it will put almost exactly the same sum in their bank accounts over the next year. Finally, some good news.
Today’s NI cut, announced by Chancellor Jeremy Hunt in his Spring Budget, slashes the main rate of primary Class 1 NI from 10 percent to eight percent, saving workers 2p for every £1 they earn.
This follows the earlier 2p cut, announced in last November’s Autumn Statement, which came into force from January 6.
Combined, the two reductions will save someone on a £35,000 salary nearly £900 over the year, putting an extra £17.21 into their pockets weekly.
The average self-employed worker will save almost £700. Higher earners will make even bigger savings, with someone on £50,000 keeping a total of £1,497.20 in the 2024-25 tax year, wealth manager Quilter’s calculations show.
The double NI cut is a much-needed boost for hard-working households, but sadly, it won’t do anything for struggling pensioners, who do not pay NI.
However, they’ll also get some good news on Monday, when the state pension is increased by an inflation-busting 8.5 percent, thanks to the triple lock – which this paper has tirelessly defended.
That will give someone on the new state pension an extra £901 a year, upping the maximum payout to £11,501.
Monday’s increase comes on the back of last year’s 10.1 percent state pension growth, making this the second bumper hike in a row.
However, those on the older basic state pension will benefit from a smaller increase of £690, rising to around £8,813 a year.
There is other good news out there, as the cost-of-living crisis finally eases. Shop price inflation fell to just 1.3 percent in March, Tuesday’s figures from the British Retail Consortium show.
That’s the first time it has fallen below two percent since the Bank of England started hiking interest rates in December 2021. Food price inflation fell to 3.7 percent, a staggering drop from 19.1 percent in March last year.
In another boost, Ofgem cut its energy price cap by 12 percent from April 1, saving the average household £238 a year on gas and electricity.
When April’s inflation figure is published next month, it may well have fallen back to the Bank of England’s two percent target. That should be the cue for the Bank’s rate-setting monetary policy committee to finally slash base rates from today’s 5.25 percent, but we shouldn’t hold our breath.
Only one of the MPC’s nine members voted for a rate cut at its last meeting in March. Hopes of a rate cut in May or June seem to have receded, as tensions in the Middle East push the oil price past the $90 a barrel mark, which may drive inflation back up.
Mortgage rates have already started climbing. UK house prices fell one percent in March, Halifax discovered.
Hopes that the US Federal Reserve would lead the charge by cutting rates in May are fading, as its economy is still running red hot. If the US doesn’t cut rates, the Bank is unlikely to stick its neck out either.
READ MORE: Millions of workers to get National Insurance cut within hours
So all that means the crisis isn’t over yet. Things are getting better, but not fast enough to revive the Conservative Party’s fortunes in the polls.
Given all we’ve been through over the past few years, a combined NI cut of 4p in the pound is a real tonic, but voters are unlikely to thank the Tories.
The overall tax burden is still at a 70-year high and likely to continue climbing thanks to Hunt and Prime Minister Rishi Sunak’s decision to freeze income tax and NI thresholds all the way through to 2028, pushing millions into higher tax bands as earnings rise.
Around 1.6 million pensioners will pay tax in retirement for the first time over the next four years, thanks to the freeze.
No wonder the Tories are trailing in the polls.
Britons have suffered one financial nightmare after another.
Today’s NI cut and Monday’s state pension hike won’t put a stop to the misery overnight, but it is yet another step in the right direction – and there should be more to follow.
