National Insurance change would cut bills for millions of people

A Labour MP put forward the idea of a National Insurance reduction for some people

Labour has issued a statement in response to a proposal to reduce National Insurance. Labour MP Nadia Whittome floated the proposal of cutting the tax for specific workers, in a written parliamentary question. She wanted to know whether Chancellor Rachel Reeves had explored “reducing employer National Insurance contributions for employees returning to work after a year or more of unemployment”.

Treasury minister Dan Tomlinson provided a response from the Labour Government. He stated that introducing a new tax relief policy would first require ministers to look at a “wide range of factors”.

He said: “These include how effective the relief would be at achieving the policy intent, how targeted support would be, whether it adds complexity to the tax system, and the cost.”

The minister also pointed to Labour’s plans to support unemployed people with “personalised support”, to help them return to the workforce.

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The Government has set a long-term target of achieving an 80 per cent employment rate, while the current figure sits at 75.3 per cent for those aged 16 to 64. Recent data shows that 9.07 million people within this age range are economically inactive at present, representing more than a fifth of people in this demographic.

Mr Tomlinson also shed light on the Government’s future plans. He said: “At the Spending Review, the Government increased funding for employment support to over £3.5billion by 2028-29, helping people to access the skills they need to progress, tackling unemployment and inactivity and ensuring more people are in better jobs.”

During its General Election campaign, Labour pledged not to increase taxes on “working people”, including income tax and National Insurance. However, Chancellor Rachel Reeves has raised the National Insurance rate that employers pay, with the tax rise announced in the Autumn Budget 2024.

The levy was increased from 13.8 per cent to 15 per cent, effective from April 2025. Making contributions to National Insurance is important as it builds up your state pension entitlement.

Typically, you need 35 years of contributions to receive the full new state pension, which currently amounts to £230.25 a week. You can claim the benefit from the age of 66.