The income tax Personal Allowance rose with Consumer Price Index inflation as planned to £12,570 in April 2021. The income tax Higher Rate Threshold also rose as planned to £50,270 in April 2021. As announced by the Chancellor, the personal tax thresholds will be frozen until April 2028 to ensure sound money in the face of global headwinds. Even after this freeze, we still have the most generous set of tax-free allowances of any G7 country.
I welcome the Chancellor's 2023 Autumn Statement, which included the biggest package of tax cuts to be implemented at a fiscal event since the 1980s, including cuts to National Insurance contributions (NICs) for 29 million people. The Government is building on this by making a further cut worth over £10 billion a year for workers across the UK, as announced at Spring Budget 2024. The main rate of employee NICs will be cut by 2p from 10 per cent to 8 per cent from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.
The Government is also cutting a further 2p from the main rate of self-employed NICs on top of the 1p cut announced in the autumn. This means that from 6 April 2024, the main rate of Class 4 NICs for the self-employed will be reduced from 9 per cent to 6 per cent. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000 around £650 a year. The combined effects of these reductions to NICs also mean that a person on the average wage now has the lowest effective personal tax rate since 1975.
Any decision to modify our tax regime is a matter for the Treasury and careful consideration will be given to any proposed amendments to current income tax thresholds.