The Chancellor has announced a cut to the main rate of employee national insurance, which is to fall from 12% to 10%.

Delivering his autumn statement to the House of Commons, Jeremy Hunt said the change will be worth £450 for someone on the average salary of £35,000 and could help 27 million workers in the UK.

National insurance is currently charged at 12% on earnings between £12,571 and £50,271, and 2% on anything above that.

The new cut will also be brought in from 6 January, as opposed to the start of the next tax year in April, so that people can “see the benefit in their payslips at the start of the new year”, Hunt said.

Despite rumours circulating in recent months that reforms to inheritance tax (IHT) could have been on the cards, from potential amendments to thresholds to abolishing the tax altogether, the Treasury has decided not to implement any changes around IHT.

The Chancellor’s statement did however involve “110 growth measures”, he stated, which included reforms to business tax relief, self-employed workers and pensions, as Hunt said the Government was delivering significant economic progress “in the face of global challenges”.

Reacting to the headline national insurance cut, head of personal finance at Hargreaves Lansdown, Sarah Coles, said the change would bring “real relief” for those struggling.

“A 2% cut isn’t to be sniffed at, and at this stage, taxpayers aren’t going to look a gift-horse in the mouth,” Coles said. “However, by keeping national insurance and income tax thresholds frozen, the Treasury has done nothing to protect us from the misery of fiscal drag, and means the lion’s share of the damage done to our finances from these tax hikes will still continue to be felt years down the line.

“By focusing on national insurance, it also limits the income boost to workers under state pension age, so there would be no tax cut for pensioners.”

Shadow Chancellor, Rachel Reeves, responded to Hunt’s statement by saying nothing announced today could “remotely compensate” for the impact of mortgage rises and cost of living pressures facing the UK.

She added that working people would remain “worse off” after announcements made by the Chancellor, and that British people “will not be taken for fools”.

Coles continued: “The Chancellor will be hoping this is enough to help people, without further fuelling inflation. Because while people who are struggling to make ends meet are crying out for some relief from tax, it could do more harm than good if it keeps interest rates higher for longer – so that what we gain from tax cuts we lose in higher mortgage payments.”

As part of the measures announced around pensions, the Chancellor also confirmed the Government’s commitment to the triple lock pledge and revealed the state pension will increase by 8.5% next April.

As a result of the 8.5% increase, the ‘old’ state pension – paid to those who reached state pension age before 6 April 2016 – will increase from £156.20 per week to £169.50 per week, or £8,814 per year. The ‘new’ state pension will increase from £203.85 per week to £221.20 per week, which will be worth £11,502.40 per year.

Head of retirement policy at AJ Bell, Tom Selby, commented: “Retirees will receive an inflation-busting state pension increase next year after Jeremy Hunt confirmed the government’s ‘triple-lock’ pledge will be fully applied in April next year.

He added: “Given where the Conservatives find themselves in the polls and the fact older people hold huge sway at the ballot box, it is hardly surprising they opted to target fiscal restraint elsewhere.”

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