Growth plan

Boost for 920k businesses as NI rise scrapped

Kwasi Kwarteng
Kwasi Kwarteng: going for growth

Chancellor Kwasi Kwarteng will cancel the National Insurance increase from 6 November and has introduced a Bill to scrap the health and social care levy which former incumbent Rishi Sunak had planned to introduce next April.

The changes will mean that almost 28 million people will be £330 on average better off next year, whilst 920,000 businesses are set to save an average £9,600, while 20,000 will be relieved of paying any NICs because of the rise in the employment allowance.

The health and social care levy was expected to raise around £13 billion a year to fund health and social care.

Ahead of his fiscal statement tomorrow, Mr Kwarteng has confirmed that funding for health and social care services will be protected and will remain at the same level as if the levy were in place. The additional funding used to replace the expected revenue from the levy will come from general taxation.

The Chancellor said that he is delivering on the Prime Minister’s pledge to slash taxes to help drive growth and is also expected to cancel a planned increase in corporation tax for the UK’s most profitable businesses.

His changes to NI were announced as the Bank of England raised the base interest rate to 2.25% – its highest for 14 years – and indicated that Britain was already in recession.

Mr Kwarteng and Prime Minister Liz Truss have said they want to move quickly in response the energy crisis, the rising cost of living and the threat to thousands of businesses.

The Health and Social Care Levy (Repeal) Bill, legislating for the tax change, has been introduced into the House of Commons today.

As part of the cancellation of the Levy, The Chancellor is also set to confirm in tomorrow’s Growth Plan that the increases to dividend tax rates will be scrapped from April 2023.

The increased dividend tax was introduced in April to ensure those who gained income from dividends contributed the same amount to help fund health and social care.

Mr Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.

“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the Levy will help them grow, whilst also allowing the British public to keep more of what they earn.”

The previous government decided to raise National Insurance by 1.25 percentage points in April 2022 to fund health and social care. The rate was due to return to 2021-22 levels in April 2023, when a separate new 1.25% Health and Social Care Levy was due to take effect. Today’s legislation reverses the rise from earlier this year and cancels next year’s introduction of the Levy.

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This is part of Ms Truss’s pro-growth agenda, backing business to invest, innovate and create jobs and helping raise living standards for everyone across the UK.

In particular, many small and medium businesses (SMEs) – who employ over 13 million people in the UK – will see a cut to their National Insurance bills. Next year this will be worth £4,200 on average for small businesses and £21,700 for medium sized firms who pay National Insurance. In total 905,000 micro, small and medium businesses will benefit from 2023-24.

National Insurance thresholds increased in July 2022 to lift 2.2 million of the poorest people in the UK out of paying the tax. The Chancellor has committed to retaining the level of these thresholds to support families. Taken together, the higher thresholds and the Levy reversal mean that almost 30 million people will be better off by an average of over £500 in 2023-24.

With immediate action pledged by the Prime Minister to maximise the cash benefit for people and businesses this year, the government is implementing the changes as soon as possible. Most employees will receive a cut to their National Insurance directly via payroll in their November pay, with some receiving it in December or January, depending on the complexity of their employer’s payroll software.

In addition, the Chancellor is expected to announce in his fiscal event tomorrow that the 1.25 percentage point increase to income tax on dividends announced alongside the Levy, and introduced in April 2022, will be reversed from April 2023.

Those who pay tax on dividends will save an average of £345 next year. The reversal of the ‘dividend tax’ rise signals renewed support for entrepreneurs and investors as part of the government’s drive to grow the economy and improve the standard of life for families across the UK.

The Chancellor is committed to reducing debt-to-GDP ratio over the medium-term and boosting growth, which will help sustainably fund public services.



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