Ahead of his ‘Growth Plan’ mini-budget tomorrow (Friday), Chancellor Kwasi Kwarteng said the rise would be reversed from 6 November.

NI was increased in April to raise money for the Government.

The new Prime Minister Liz Truss made a pledge to axe the NI rise if she was elected.

In addition, the Treasury confirmed that the Health and Social Care Levy will be cancelled through a Bill introduced today in Parliament.

As part of the cancellation of the levy, the Chancellor is also set to confirm that the increases to dividend tax rates will be scrapped from April 2023. The increased dividend tax was introduced in April 2022 to ensure those who gained income from dividends contributed the same amount to help fund health and social care.

In future, funding for health and social care services will be “protected” and will remain at the same level as if the levy were in place, the Treasury said.

The moves should mean that almost 28m people will keep an extra £330 of their money on average next year while 920,000 businesses should save almost £10,000 on average next year.

With the NI rise cancelled, employers will no longer pay a higher level of employer National Insurance.

The Health and Social Care Levy was due to come into effect in April next year. The Health and Social Care Levy (Repeal) Bill, legislating for the tax change, has been introduced into the House of Commons today. 

Chancellor of the Exchequer Kwasi Kwarteng said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.

“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the Levy will help them grow, whilst also allowing the British public to keep more of what they earn.”

The previous government, under Boris Johnson, decided to raise National Insurance by 1.25 percentage points in April 2022 to fund health and social care. The rate was due to return to 2021-22 levels in April 2023, when a separate new 1.25% Health and Social Care Levy was due to take effect. 

The Treasury says that 920,000 businesses will see a cut in National Insurance bills, with 20,000 taken out of paying National Insurance due to the Employment Allowance, which rose in April 2022 from £4,000 to £5,000.

The Government has said it believes that many small and medium businesses (SMEs) – which employ over 13m people in the UK – will see a cut to their National Insurance bills. Next year this will be worth £4,200 on average for small businesses and £21,700 for medium sized firms who pay National Insurance. In total 905,000 micro, small and medium businesses will benefit from 2023-24, according to the Treasury.

National Insurance thresholds were increased in July to take 2.2 million lower income people out of paying the tax. The Chancellor says he has committed to retaining the level of these thresholds to support families. Together, the higher thresholds and the levy reversal mean that almost 30m people will be better off by an average of over £500 in 2023-24, the Treasury says.