UK’s 2% National Insurance Reduction

The UK’s 2% national insurance reduction is a key item multinational employers should understand from the UK’s most recent national budget announcement. Paul White, head of technical for Howden Employee Benefits & Wellbeing, Emma Hadley, head of pensions at Howden Employee Benefits & Wellbeing, and Saba Haran, Employee Benefits Director, Scotland, shared their insights on this aspect and more in this Howden article.

National Insurance reduction: promoting work and financial stability.

Regarding National Insurance, Emma Hadley highlighted the 2% reduction in National Insurance Contributions as the headline for the workplace. The Chancellor stated this move was intended to promote growth and “make work pay” while safeguarding funding for public services.

The NIC reduction will see employees now pay 8% of their earnings between £12,570 and £50,270, compared to the previous rate of 10% and before that 12%.

This means that an average worker on £35,400 will receive a tax cut of over £450. Having more take-home pay could, of course, help people with cost-of-living challenges or prompt some to increase their pension contributions.

However, Emma cautioned that the tax thresholds being frozen until 2028 will mean more individuals fall into the higher-rate tax bracket as inflationary pay increases take their pay above the upper threshold.

Saba Haran emphasized that the reduction in NIC would make a notable difference to many employees, particularly in Scotland, potentially improving their financial stability and enabling greater flexibility in budgeting and saving.

Read the full article, which includes insights on the budget’s:

• Pension Policy Changes: Abolishing Lifetime Allowance and Flexibility for Savers
• Investment Focus and NHS Productivity

 

This information about the UK’s 2% National Insurance reduction is provided by Howden UK Employee Benefits and Wellbeing, Asinta’s consulting Partner in the country. If you need support with your employee benefits in the UK, please contact Asinta, and we will connect you with the local experts at Howden.