National Insurance increase reversed - how much will you save?

The National Insurance increase that came into force in April 2022 will be reversed. The u-turn was announced by former Chancellor of the Exchequer Kwasi Kwarteng. 

National Insurance had gone up by 1.25 percentage points in April to help raise money for health and social care in England. But this will now be reversed.

A planned Health and Social Care Levy that was due to come into force in April 2023 has also been scrapped. According to the government, the reversal of the National Insurance (NI) hike and the scrapping of the planned levy means that almost 28 million people will be £330 better off in the next tax year on average. 

The National Insurance threshold change that came into effect in July 2022 will remain in place when April's increase is reversed.  

When will the National Insurance increase be reversed?

The 1.25 percentage point National Insurance increase that was introduced by former chancellor Rishi Sunak in April 2022 will be reversed from Sunday 6 November 2022, the Treasury has announced. 

Former chancellor Kwasi Kwarteng said reversing the NI hike would help to grow the economy "whilst also allowing the British public to keep more of what they earn."

The National Insurance threshold change that was introduced in July 2022, will remain in place. The increase to the threshold, the point at which people start to pay National Insurance, meant that 2.2 million of the poorest people in the UK no longer had to pay NI. For others on salaries of around £35k per year a less, the 1.25 percentage point increase was effectively cancelled out. “

The announcement came the day before Kwasi Kwarteng delivered his mini budget, where more tax cuts and other measures to grow the economy and help families cope with the cost of living crisis were announced. But following the mini budget, the value of the pound fell, causing turmoil across many parts of the economy.

As a result, Kwasi Kwarteng was sacked as Chancellor and replaced by Jeremy Hunt. Liz Truss also resigned as Prime Minister and was replaced by Rishi Sunak.

Jeremy Hunt was expected to deliver the Autumn Budget on 31 October, but this was pushed back to 17 November following the leadership change.

How much will I save when the National Insurance increase is reversed?

How much you save when the National Insurance hike is reversed will depend on how much you earn. As the rate of National Insurance you pay is calculated as a percentage of what you earn, those who earn more will save more (but they will also pay more in National Insurance than someone on a lower wage). 

Sian Steele, Head of Tax at wealth manager Evelyn Partners, crunched the numbers to work out how much you will be better off per year when National Insurance comes back down based on different salaries. 

How much National Insurance will I pay from November?

The amount of National Insurance you pay will depend on how much you earn. Use the table below to see what rates you are paying now and what they will be when the reversal is implemented from 6 November. 

You will likely pay more NI in November as for the first five days of the month, you will pay the higher rate, then it will drop by 1.25 percentage points for the rest of the month. But from December onwards, you will pay the same rate for the whole month.  

If you are employed

If you earn less than £12,570 per year (or less than £242 per week), you won't be paying National Insurance at the moment, and as the threshold is not changing, you won't be paying it after 6 November either. 

If you earn between £242 and £967 per week, you are currently paying National Insurance at a rate of 13.25%. But from 6 November this will drop back down to 12%, which is the same rate you would have been paying in the 2021/22 tax year. 

If you earn more than £967 per week, you are currently paying 3.25% National Insurance but this will come back down to 2% from 6 November. 

Most employees will see the National Insurance cut in their November pay packet, but depending on your employer's payment system, some people may not see the impact until their December 2022 or January 2023 pay packets. 

The Treasury says: "Although individuals should contact their employer for refunds as a first port of call in all circumstances, there may be circumstances where individuals may need to apply to HMRC for a refund (for example, if their employer is no longer trading, or if an individual has moved roles and their previous employer has confirmed they are unable to issue a refund retrospectively themselves)."

If you are self employed

According to the announcement from the Treasury "Self-employed people and company directors will pay a blended rate of National Insurance – taking into account the changes in rates throughout the year – when they submit their annual self-assessment return."

It is likely that more information will become available in the coming days and we will update this page with the latest information as soon as we have it.

How much money will I save when National Insurance is cut?

The reversal of the National Insurance hike will see those who currently pay the basic rate of 13.25% save about £75 on average for the rest of the current tax year (which runs until 5 April 2023). This will rise to an average saving of £175 in the 2023-24 tax year which runs from 6 April 2023 until 5 April 2024. 

 Don't forget, this cut in November is happening at the same time as the second instalment of the £400 energy rebate that was also announced earlier this year.