Chancellor Jeremy Hunt has confirmed the National Insurance hike and introduction of the Health and Social Care Levy will not take place despite making a host of u-turns today undoing much of the disastrous mini-budget announced last month.
In a HM Treasury statement Hunt, who became the fourth chancellor in four months when he replaced Kwarteng on Friday, confirmed the government’s reversal of the National Insurance increase and the Health and Social Care Levy would be maintained.
The move will eliminate more than £65bn of funding earmarked for the NHS and social care services over the next five years.
This means as announced in September, National Insurance Contribution (NIC) rates will be reduced from 6 November, in effect removing the temporary 1.25 percentage point increase for the remainder of the 2022-23 tax year.
The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as previously planned.
This tax cut reduces 920,000 businesses’ tax liabilities by £9,600 on average in 2023-24, which is 60% of the UK’s businesses with employer NICs liabilities, HM Treasury said at the time.
Severe shocks
The mini-budget was presented on 23 September by then-chancellor Kwarteng and was seen as a joint strategy with newly appointed Conservative prime minister Liz Truss.
However severe market shocks and substantial Bank of England action resulted in Truss firing Kwarteng and undoing two prominent measures in the announcement already.
Combined with those already announced, the further u-turns announced today are expected to return £20bn in tax income to HM Treasury in 2023-24, rising to £32.3bn in 2026-27.
However, some other measures were also held over from the September mini-budget, including cuts to Stamp Duty Land Tax.