Ahead of the Election, the Conservatives are pledging to cut National Insurance tax by 2p. This comes after another cut in the Spring Budget. This all forms part of their pledge to slowly cut national insurance entirely. They are also pledging to continue their freeze on tax thresholds until 2028.

What does a 2p National Insurance tax mean for me?

If you earn £25,000 a year, a 2p NI Tax cut results in an extra £267 a year (£22 a month). If you earn the national average wage of £30,000, a 2p NI tax cut results in an extra £368 a year (£31 a month)—a much-needed boost to those suffering the effects of the ongoing cost of living crisis.

This saving compounds higher the more you earn for example, someone earning £50,000 would receive an extra £704 a year (£58 a month).

This will likely be seen as a net positive for those looking for tax cut promises. Although there will be some hoping for more tax cut promises, specifically, conservative voters wanting inheritance tax to be cut as has been discussed throughout the early period of 2024.

What is the freezing of tax thresholds?

The pledge to freeze tax thresholds until 2028 will continue the Conservative's promise to not increase the amount of income tax you pay. Whilst this is true on paper, this doesn't mean that people won't end up paying more tax. Due to a fiscal event called "fiscal drag", as people's wages continue to rise, more and more people will be dragged into higher tax brackets. This has been called a stealth tax, where people are being taxed on their income, just not via a tax increase, but by letting more and more people paying lower taxes be dragged into higher tax bands.

What do these pledges mean for me financially?

In the short term, a cut to NI would mean a small increase in your weekly & monthly pay packets. For those earning more money, you're likely to see greater short-term savings. This will be seen as a short-term boon to those looking for help with the cost of living crisis.

However, the impact of freezing the tax thresholds, alongside inflation means that in the long term, there is a chance that you will be dragged into a higher-tax band, and therefore end up paying more tax than previously.