The latest Tory pledge to cut National Insurance and stamp duty have been dubbed ‘nothing new’ by industry commentators.
As the election looms, Prime Minister Rishi Sunak has unveiled plans to cut NI by a further 2p by April 2027. He has also pledged to reduce the main rate of NI paid by the self-employed, scrapping it completely by April 2029.
Laura Suter, director of personal finance at AJ Bell, said: “The Conservatives are sticking with their previous playbook of focusing on cutting National Insurance rather than making other changes to taxes. While it’s done little to move the needle when it comes to voter enthusiasm for the Conservatives, the party clearly feels that having the headline of abolishing NI is a stronger message than tinkering with income tax rates.”
The government has already cut NI for employees twice within the last year, first from 12% to 10% and then down further to 8%. This latest move, the third rate cut to be implemented by the Tories, would reduce the employee rate to 6p.
However, AJ Bell raised a question mark over how much it would benefit workers. A person earning £35,000 would save around £450 a year in NI, while anyone earning more than the higher rate allowance of £50,270 would save the maximum £754 a year. But lower earners on £15,000 a year will save less than £50 on their NI bill.
Suter said: “The highest earners will be feeling short-changed too, as someone on £100,000 a year will save the same amount as someone earning half that salary. While some may struggle to muster up much sympathy for those earning six-figures, this move would have a huge impact on single earner households. A couple each earning £50,000 a year will see their combined National Insurance bill cut by almost £1,500 a year but a sole earner on £100,000 will only save £754 a year.
“Also missing out are those above state pension age and earning less than the National Insurance threshold of £12,570, who would see no difference from the proposed cut. The reason that a cut to National Insurance is cheaper than the same cut to income tax is because it benefits fewer people. Those over state pension age don’t pay National Insurance, whereas they do pay income tax.”
Shaun Moore, tax and financial planning expert at Quilter, said the pledge may be a case of “too little, too late.”
“The reality is that many people are looking to the difficulties that public services are facing at the moment and wondering how such a tax cut like this will impact the NHS, schooling and other state support. Balancing individual financial relief with the sustainability of public services will be key in ensuring this change benefits the broader society if the party has the chance to enact it.
“It is important to remember too that this change gives nothing to pensioners who do not pay national insurance. The Conservatives will be hoping that the ‘Triple Lock Plus’ policy gives pensioners enough to stop them feeling hard done by.”
The Tories pledge to extend the current stamp duty holiday for first-time buyers also met a lukewarm response, with AJ Bell calling it “nothing new”, but rather a “rinse and repeat” of their previous policy.
Under the proposed changes, the levy would be permanently scrapped for first-time buyers of properties costing up to £425,000. The previous policy was due to expire in March next year.
Suter said: “Rishi Sunak has admitted that it has become harder to become a homeowner under the Conservatives but his policies for first-time buyers will do little to change the situation. The manifesto doesn’t make clear whether it will also extend the relief for those buying a property worth up to £625,000 who currently benefit from no stamp duty on the first £425,000 of their purchase.”
At the same time, Rishi Sunak has said he will extend the Help to Buy scheme, which offers loans of up to 20% for homeowners buying new-build properties.
However, Suter added: “Most aspiring homebuyers will likely find this set of policies lacking in imagination and excitement. While they will help to get some people on the property ladder, it’s not the drastic reform that many would have been looking for.”
