The move brings forward the tax cut – promised by Prime Minister Liz Truss during her Conservative leadership campaign – from its expected date of April next year. A day before the emergency budget on Friday, Mr Kwarteng tabled legislation to scrap Rishi Sunak’s health and social care levy, which was intended to raise £13bn a year to cut NHS waiting lists and alleviate the financial crisis that is crippling the healthcare system. But the chancellor insisted that the health and care systems would not lose out from the change as the same amounts would be found from general taxation. It said almost 28 million people will keep an extra £330 of their money on average next year, with 920,000 businesses also saving an average of almost £10,000. Announcing the move, Mr Kwarteng said: “Taxing our way to prosperity has never worked. To raise the standard of living for all, we must be unforgiving with the growth of our economy. “Tax cuts are vital to this – and whether businesses reinvest the freed-up cash in new machinery, lower shop prices or increased staff wages, reversing the levy will help them grow, while also allowing the British public to keep more what do they earn”. Mr Sunak announced last September that he had increased employee contributions to National Insurance by 1.25 percentage points from 12 to 13.25%. At the same time, NI employer contributions were increased by the same amount as what some Tory MPs considered a tax on work. After a year as an additional NI payment, the levy was due to be rebranded as the health and social care levy in 2023. Amid growing concern about the cost of living, Mr Sunak softened the blow of the levy in his Spring Budget this year with to amend the thresholds at which NI is payable. Treasury figures showed today’s move would benefit high earners far more than the poorest. Those earning more than £150,000 will earn an average of £1,650 this year, rising to £3,890 in 2023/24. The equivalent saving for workers in the 40 per cent would be £300 this year and £700 next year. For basic rate payers on a salary of less than £50,270, the switch is worth an average of just £75 in 2022/23 and £175 the following year. Anyone earning less than £12,570 a year pays no NI and therefore gains nothing from the increase being reversed. During the leadership contest, Ms Truss insisted it was “fair” that the wealthiest would gain most from her tax plans. “Of course, there are some people who pay no tax at all,” he told the BBC. “But looking at everything through the lens of redistribution I think is wrong because what I’m doing is growing the economy and growing the economy benefits everyone.” Mr Kwarteng also announced that he is reversing the 1.25 per cent increase in income tax on dividends, which Mr Sunak introduced to collect profits for which National Insurance is not payable.
