Jeremy Hunt has announced cuts to employee National Insurance from 12 percent to 10 percent.
The cut will be introduced from January 6, 2024, and save millions of people around £450 a year.
Mr Hunt told the Commons he would bring forward urgent legislation to Parliament to introduce the cut in national insurance for employees “from January 6, so that people can see the benefit in their payslips at the start of the new year”.
He added: “It means someone on the average salary of £35,000 will save over £450.
“For the average nurse, it is a saving of over £520 and for the typical police officer it is a saving of over £630 every single year.”
The Chancellor told MPs this change would “help 27 million” by putting extra money in their payslips.
The OBR states these lower taxes mean more people will be in work.
These measures will lead to around 94,000 full-time employees in the economy.
Mr Hunt added: “We have delivered the largest ever cut to employee and self-employed National Insurance and the biggest package of tax cuts to be implemented since the 1980s.”
The Chancellor announced the abolition of Class 2 National Insurance payments for two million self-employed people.
In today’s Autumn Statement, Mr Hunt said the reform would save self-employed earners £192 a year on average.
The tax cut will come in on January 6 next year and will see a two percentage point decrease in National Insurance.
This will affect income between £12,570 and £50,270, which will be reduced to 10 percent. This means those on an average salary of £35,000 will be saving more than £450 a year.
However, shadow chancellor Rachel Reeves says that cut will not offset earlier rises. The Labour frontbencher said prior tax increases under the Tory government and failure to update tax bands meant there has been an effective 10 percent hike in National Insurance.
An expert has explained in reality worker will only be getting a benefit of around 50 percent due to the frozen tax bands and fiscal drag.
Shaun Moore, tax and financial planning expert at Quilter said: “Hunt has given workers a miniscule nibble of carrot with his 2p cut to National Insurance contributions after they’ve been battered by stick recently.
“The reality is workers are just £2.68 a week better off due to today’s tax ‘giveaway’ than they would have been had tax thresholds not been frozen.
“More money in people’s pockets thanks to tax cuts is no doubt a good thing but this move gives someone on the average salary of £32,963 an extra £8.60 a week due to the NI cut.
“But the reality is you only are getting a benefit of around 50 percent of this due to the frozen tax bands and fiscal drag. If we assume the tax bands had increased by two percent over the last four years, someone earning £34,963 should be a further £308.40 better off.
“Therefore, if you take this off today’s headline saving in tax it is actually only a saving of £139.46 over the year or a rather measly £2.68 a week.”
The expert stated this cut will only make a “minor difference” to the amount of money people have while simultaneously risking the lower inflation figure we have been striving for.
Shona Lowe, Financial Planning Expert at abrdn agreed saying a two percent cut won’t be a “cure-all” for the pressure on households’ finances, however, it will put some more in people’s pockets each month.
She explained one key takeaway is the continuing importance of making the money people have work as hard as it can for them.
Ms Lowe said: “The NI changes announced today will no doubt raise questions and there is often hidden complexity with such a change.
“These are uncertain and constantly changing times, and one of the big advantages of speaking to a financial adviser is that, on top of expert practical advice, they’re able to help you understand what new announcements, like tax alterations, might mean for your personal finances.”
