THE CHANCELLOR's move to cut National Insurance (NI) by a further two pence will not negate the higher tax burden felt by earners at the top end of the wage scale, analysis released after the budget yesterday revealed.

Hunt slashed NI from 12 per cent to 10 per cent in autumn and cut another two percentage points yesterday.

The move will mean savings of £450 per year for the average earner and £754 per year for those on £50,270 or more. NI is charged on a band of earnings between £12,570 and £50,270.

However, that figure does not account for fiscal drag, where the thresholds at which higher rates of income tax kick in are frozen, and do not rise in line with inflation.

AJ Bell acknowledged that the changes to NI were broadly a tax cut "in isolation", but noted that the government has kept income tax bands frozen since March 2021 despite high inflation and wage growth. Hunt extended the freeze until 2028-29.

It calculated that if the government had made the bands inflation-linked and kept NI at 12 per cent, lower earners on £15,000 would save £390 per year. Those earning between £75,000 and £100,000 will pay £1,150 more as a result of the thresholds not being uprated with inflation, even with the tax cuts.

AJ Bell added that middle earners on £35,000 and those on £50,000 would benefit from the new system, with annual savings of £366 and £966 respectively. The former earners could save £900 on NI from April.

"This mixed picture for different earners will be exactly the kind of figures Labour will pounce on to highlight how Hunt's tax cuts aren't actually tax cuts for much of the population," said Laura Suter, director of personal finance at AJ Bell.

(c) 2024 City A.M., source Newspaper