Thank you for contacting me about the income tax Personal Allowance.
The income tax Personal Allowance rose with Consumer Price Index inflation as planned to £12,570 in April 2021. The income tax Higher Rate Threshold also rose as planned to £50,270 in April 2021. They were to be frozen at that level until April 2026. However, as you know, at the Autumn Statement 2022, the Chancellor announced that the personal tax thresholds would be frozen for a further two years until April 2028 to ensure sound money in the face of global headwinds. Even after this freeze, we will still have the most generous set of tax-free allowances of any G7 country.
I welcome the Chancellor's 2023 Autumn Statement, which includes the biggest package of tax cuts to be implemented at a fiscal event since the 1980s, all while getting borrowing lower and inflation falling. The main rate of Class 1 employee National Insurance contributions (NICs) has been cut from 12 per cent to 10 per cent from 6 January, meaning the average worker on £35,400 will receive a tax cut in 2024-25 of over £450. I know this won’t be of any advantage to you, but it will be for millions of working people.
The Government is also cutting taxes for the self-employed from 6 April 2024. It will reduce the main rate of Class 4 self-employed NICs from 9 per cent to 8 per cent and abolish the outdated and needlessly complex Class 2 self-employed NICs, reforming and simplifying the tax system. Taken together, these changes will benefit around 2 million self-employed individuals and result in an average self-employed person on £28,200 saving £350 in 2024-25.
Any decision to modify our tax regime is a matter for the Treasury and careful consideration will be given to any proposed amendments to current income tax thresholds. I will ensure my colleagues at the Treasury are aware of the strength of feeling on this issue.
Thank you again for taking the time to contact me.
Kind regards,
Graham