How much will a further 2p National Insurance cut save me?
If, as widely expected, Chancellor Jeremy Hunt cuts employees' National Insurance from 10% to 8%, it will benefit the UK's 27 million workers.
The chancellor has already cut NI once, which kicked in from 6 January. A further 2p cut could begin in April.
This chart shows the expected annual savings - but remember that, if income tax thresholds are frozen until 2028-29 as planned, more people will pay higher rates of income tax, even as NI falls.
BBCCopyright: BBC
Analysis
In Downing Street, two big ideas are on Hunt's mind
Faisal Islam
Economics editor, in Downing Street
BBCCopyright: BBC
I'm outside number 11 in a cold Downing
Street where in less than an hour, Jeremy Hunt will have his famous Budget red box
moment.
Two big ideas, I believe, are
weighing on his mind.
Firstly, he wants this National Insurance cut to be seen
as part two of an overall 4p cut, after last year's 2p cut.
He hopes this will not just move the dial
with the electorate, but be seen as part of a plan to solve some of
the long term problems in the economy. In this case, fixing the low supply of labour
by greatly increasing the incentive to work extra hours.
But more than that - after the state and tax burden grew because of the
pandemic and the energy crisis, Hunt wants to argue the state should be smaller.
He wants to say that there should be
efficiencies in public spending that should fund a lower tax burden - and he
feels this will be a dividing line at the election.
However, perhaps his biggest
call right now is to tell the electorate that the economy is at a turning point.
That would have been clearer if the picture from the turn of the year had
endured - that the economy maybe was starting to grow and that interest rates were
starting to fall.
But that picture did not last.
The interest rates facing government debt increased. The ONS said that we
dipped into a recession at the end of last year. And the Bank of England is not yet
ready to cut interest rates.
Planes, vapes, and non-doms could raise revenue
Getty ImagesCopyright: Getty Images
As we just reported, today is not just about National Insurance and income tax - although they are likely to make the headlines.
As well as tax cuts, chancellor is also considering how to raise revenue, including a new tax on vapes.
Currently, vaping products are subject to VAT - but unlike tobacco, they do not have a dedicated levy.
Air travel for business class passengers could become more expensive with a possible an increase in Air Passenger Duty for that class of traveller.
Another possibility is a windfall tax for oil and gas companies. This was introduced in 2022 and is due to run until 2028. Reports suggest it could be extended.
The government is also reportedly exploring the option of scrapping the tax status on non-doms - people who live in the UK, but whose home for tax purposes is overseas.
With four weeks to go, there are calls for Household Support Fund to be extended
Colletta Smith
Cost of living correspondent
BBCCopyright: BBC
When Israel and Osaretin Asemotas had triplets, Israel reduced his hours at work to help his wife care for the babies while she was on maternity leaveImage caption: When Israel and Osaretin Asemotas had triplets, Israel reduced his hours at work to help his wife care for the babies while she was on maternity leave
We've been focusing on National Insurance and income tax so far - but today's budget will see a whole range of economic annoucements.
For example, charities and councils will be watching to see whether the chancellor extends the Household Support Fund.
Over the past two and a half years, £2.5bn has been given to local councils, who have then distributed it via food banks, warm spaces, holiday clubs, food vouchers and direct grants.
The fund is due to end in four weeks' time and Barnardo's charity has told the BBC this would be "catastrophic".
A cross-party group of 160 councils in England has called for the "vital lifeline" to be extended. But the government says other benefits are rising to help cover living costs.
Among the hundreds of thousands of families who have received help from the fund are Israel and Osaretin Asemotas.
They received a grant from Oldham Council via Homestart Host, which they used to pay for baby formula, nappies and energy bills.
"It's been a relief to get the help, but we know it will still be a struggle in the months and years ahead," says Israel.
"I feel for those who are going to be in my own shoes. This is one of the things that can really help."
What are the fiscal rules?
Most wealthy countries have some sort of fiscal rules which help them maintain credibility with the financial markets - a key source of government borrowing.
The interest rates investors charge on government debt or mortgage debt take their cue from how much risk is attached to lending money.
A good example of what happens when financial markets get rattled is the mini-Budget in 2022. In it, short-lived Prime Minister Liz Truss and her chancellor Kwasi Kwarteng unveiled £45bn in tax cuts, but failed to spell out how they’d actually pay for them – unleashing chaos and a sharp rise in mortgage rates.
Under Jeremy Hunt, the government has two key fiscal rules. One is to get debt, which is the borrowing stacked up over the years, falling as a percentage of national income – or gross domestic product (GDP) –by 2028-29.
The other is for public sector net borrowing, which is the annual deficit, to be less than 3% of GDP by the end of the period.
The choice of rules is up to the government – but the current format has been criticised by some economists for being too loose. To comply, debt has to only fall in the fifth year of the forecast, and can rise further in the meantime.
.Copyright: .
One of the government's rules is to get debt, as a percentage of GDP, falling by 2028/29Image caption: One of the government's rules is to get debt, as a percentage of GDP, falling by 2028/29
UK tax take approaching post-Second World War levels
As Dharshini just reported, UK tax levels - compared to GDP - are approaching the highest levels since just after the Second World War.
As a reminder, one of the government's fiscal rules is is to get debt falling as a percentage of GDP by 2028-29. We'll have more on those rules next.
.Copyright: .
How high is the UK's tax compared to other countries?
Dharshini David
Chief economics correspondent
Few people think they’re paying too little tax - but, relative to the size of our economy, we pay slightly less tax in the UK than the average for wealthy countries.
As a proportion of GDP, we pay more than the US but less than most European nations. However, that proportion - the UK's "tax burden" - is currently predicted to rise to the highest level since the Second World War.
Conversely, government spending is slightly higher, compared to the size of our economy than the average for wealthy countries.
So the gap between the two - the deficit, typically matched by borrowing - is slightly higher than our competitors’ average.
The differences between nations reflect some economic factors but are overwhelmingly political decisions - and ultimately, budgets are just that: political decisions.
.Copyright: .
'We're being squeezed by frozen income tax thresholds'
BBCCopyright: BBC
As we just reported, some Conservatives are calling for income tax to fall - rather than National Insurance.
New mum Charlotte Birchett says she wants to see the chancellor to unfreeze income tax thresholds “because they have been there for so long and people are still struggling”.
As a reminder, people in England, Wales, and Northern Ireland pay the 20% basic rate of income tax on earnings over £12,571, the higher 40% rate over £50,271, and 45% on earnings over £125,140. Those thresholds are expected to remain frozen until 2028.
Before taking maternity leave, Charlotte worked full-time. “We work hard,” says Charlotte, who is based near Manchester.
“We want to show that we’re doing a good job and we just feel that at the moment it is getting more and more difficult and we’re not really seeing any improvement.
"Even if when we get our pay review it’s still not really making a difference."
Analysis
A tinge of Tory disappointment if income tax isn't cut
Henry Zeffman
Chief political correspondent
Of course, the most important lens through which to assess the National Insurance cut is
economic — questions like will it boost growth, will it incentivise work, is it
the right priority compared to spending on public services?
But Budgets
fuse the economic with the political, especially in an election year. For many
Conservative MPs the most important question is whether this tax cut will help
them hold on to their seat at the election.
Many were
desperate for personal tax cuts of any form in this budget — and so they are
welcoming Jeremy Hunt’s reported 2p cut in National Insurance.
But in some
quarters there is also a clear tinge of disappointment that it is seemingly not income
tax being cut instead.
One former minister told me that they feared only income
tax would “cut through” to voters because it is easier to understand, and
affects more people.
They also pointed out that unlike National Insurance, income
tax affects pensioners, who are a crucial part of the Tory electoral coalition.
Cabinet arrives in Downing Street before Budget speech
ReutersCopyright: Reuters
As Jeremy Hunt recovers from his run, government ministers are making their way to Downing Street to formally sign off the Budget.
Home Secretary James Cleverly, Northern Ireland Secretary Chris Heaton-Harris, Defence Secretary Grant Shapps have been spotted this morning.
Ministers including Andrew Mitchell, Esther McVey, Alex Chalk and Laura Trott have also walked into No 10 in the last few moments - all have ignored questions from the shouting press pack.
Hunt goes for morning run with Poppy
PA MediaCopyright: PA Media
The chancellor is up bright and early before his lunchtime budget - here he is running near Downing Street this morning with his labrador, Poppy.
Analysis
Can a second bash at National Insurance move the dial?
Chris Mason
Political editor
For the chancellor and the prime minister, with an election imminent,
there is a rapidly shrivelling number of big set piece moments where the levers
and stage of government can be commanded to attempt change; economic and
political.
A stagnant economy and dire opinion poll ratings are the backdrop,
coupled with the fear among many Conservative MPs that swathes of the
electorate have stopped listening – whatever they now say.
The 2p National
Insurance cut in the Autumn Statement didn't appear to shove the political
dial.
Will having a bash at the same idea again work second time round?
Some
Tories would like to see an income tax cut. A better headline, they think, but
there’s a catch: it’s more expensive.
Labour reckon the government might cut
income tax too. And Sir Keir Starmer will choose to agree with the tax cuts for
workers. But, in so doing, create a spending headache for Labour if they win.
Will today's Budget mean drivers pay more for petrol?
Dearbail Jordan
Business reporter
Getty ImagesCopyright: Getty Images
No government has, since 2011, raised fuel duty - and it seems highly unlikely in an election year that Jeremy Hunt will break with that tradition today.
It means that duty on petrol and diesel will not be lifted in line with inflation. It is also widely expected that Hunt will extend a “temporary” 5p cut on fuel duty, announced in 2022, for another year - it was supposed to come to an end this month.
Capital Economics calculates both measures will cost the Treasury £6.2bn in total. But, with tens of millions of drivers on Britain’s roads, a rise in duty would go down like the proverbial lead (or unleaded?) balloon with voters.
Braverman and Patel call for income tax cut, rather than National Insurance
PA MediaCopyright: PA Media
As we reported earlier, some Conservatives want a cut in income tax, rather than National Insurance - even though it costs the Treasury more.
Former home secretary Suella Braverman says "my preference would be 2p off
the basic rate of income tax".
Aga Szedzianis and her husband, who are both associate architects, earn just over £50,000 each.
But she says, with price rises, the cost of childcare and their mortgage soon set to go up by £500 a month, things are getting "quite uncomfortable".
"We had to stop paying pension contributions recently. We can afford only what's now and not the future,” says the 37-year-old mum-of-two from Newham, east London. "We can't afford holidays anymore."
Aga would like to see income tax thresholds going up. Usually tax thresholds rise in line with inflation, but they have been frozen since 2021.
So as your pay goes up, a bigger portion of your income is taxed.
"The biggest help to us would be raising the threshold for paying 40% tax. If it was raised from £50,000 to £60,000, it would [potentially] give us £2,000 a year each."
As a reminder, the 40% rate of income tax starts in England, Wales, and Northen Ireland on earnings above £50,271. There are different rates in Scotland, which can set its own income tax.
Why cut National Insurance, rather than income tax?
Dearbail Jordan
Business reporter
Some Conservatives want a cut in income tax, rather than National Insurance. They argue it's more likely to be noticed by voters - and therefore a better election strategy.
But a cut in the basic rate of income tax would be more expensive, because it affects more people - including those who make money from property, as well as some pensioners.
In contrast, National Insurance affects just those in work.
So, a cut in the basic rate of income tax from 20p to 19p would cost the Treasury around £7bn a year. A 1p cut in National Insurance would cost the Treasury around £4.7bn per year.
(The 2p cut that's likely to be announced today will cost around £9bn - £10bn a year).
And, as my colleague Dharshini just explained, an NI cut would only partially offset income tax thresholds being frozen until 2028-29.
That means that while you may get a pay rise, it could drag you into a higher tax bracket.
Analysis
Fiscal drag - the stealth tax that won't be in the Budget
Dharshini David
Chief economics correspondent
One of the biggest tax changes that may affect your payslip won’t be in today’s Budget.
In the past, governments typically lifted certain tax thresholds each year in line with inflation. But the thresholds at which taxes apply on income have been frozen for the last few years.
And the intention is for that to continue until 2029. It is what’s known as the fiscal drag and it means that as incomes rise, a larger part of your wage may go to government coffers than otherwise.
Official forecasts say it could increase the total number of taxpayers by four million by 2029, with an extra three million having been sucked into the 40% band.
The income threshold at which self-employed people, or small businesses have to register VAT has also been frozen at £85,000.
Fiscal drag is predicted to raise an extra £45bn for the Treasury by 2029 - so for the government it’s a big money-spinner.
Tories promised to fix the roof - but the house is burning down, says Labour
PA MediaCopyright: PA Media
As expected, Labour has not welcomed the likely cut in National Insurance with open arms. Instead, shadow chancellor Rachel Reeeves has accused the Tories of overseeing
"14 years of economic failure".
"The Conservatives promised to fix the nation's roof,
but instead they have smashed the windows, kicked the door in and are now
burning the house down,” she says.
"Taxes are rising, prices are still going up in the
shops and we have been hit by recession.
"Nothing the chancellor says or does
can undo the economic vandalism of the Conservatives over the past
decade."
Labour also said any tax cuts today would be cancelled out by
the continued freeze on income tax thresholds - meaning more people are
dragged into higher bands as their pay increases.
We'll have more on that so-called "fiscal drag" from our chief economics correspondent, Dharshini David, next.
Hunt promises 'permanent' tax cuts
ReutersCopyright: Reuters
For a second time in less than four months, the Chancellor
is expected to cut National Insurance for employees by 2p in the pound.
In quotes released overnight, Jeremy Hunt did not confirm the move - but he did pledge "permanent cuts" in taxation.
"Of course, interest rates remain high as we bring down
inflation,” Hunt said.
"But because of the progress we've made because we are
delivering on the prime minister's economic priorities we can now help families
with permanent cuts in taxation.
"We do this not just to give help where it is needed in
challenging times. But because Conservatives know lower tax means higher
growth. And higher growth means more opportunity and more prosperity."
Welcome to the Budget 2024
HM TreasuryCopyright: HM Treasury
A picture of Jeremy Hunt in 11 Downing Street, released by the government last nightImage caption: A picture of Jeremy Hunt in 11 Downing Street, released by the government last night
Thanks for joining us on a big day for UK politics, economics - and the money in your pocket.
The Budget outlines the government's plans for raising or lowering taxes, and sets out spending on public services like the NHS, schools and police.
At 12:30 GMT, Chancellor Jeremy Hunt is expected to cut National Insurance by another 2p - that could save the average worker around £450 a year.
But that will just be one part of today's announcement - stay with us for all the news, reaction, and analysis.
Live Reporting
Edited by Johanna Chisholm and Emily Atkinson
All times stated are UK
Get involved
How much will a further 2p National Insurance cut save me?
If, as widely expected, Chancellor Jeremy Hunt cuts employees' National Insurance from 10% to 8%, it will benefit the UK's 27 million workers.
The chancellor has already cut NI once, which kicked in from 6 January. A further 2p cut could begin in April.
This chart shows the expected annual savings - but remember that, if income tax thresholds are frozen until 2028-29 as planned, more people will pay higher rates of income tax, even as NI falls.
In Downing Street, two big ideas are on Hunt's mind
Faisal Islam
Economics editor, in Downing Street
I'm outside number 11 in a cold Downing Street where in less than an hour, Jeremy Hunt will have his famous Budget red box moment.
Two big ideas, I believe, are weighing on his mind.
Firstly, he wants this National Insurance cut to be seen as part two of an overall 4p cut, after last year's 2p cut.
He hopes this will not just move the dial with the electorate, but be seen as part of a plan to solve some of the long term problems in the economy. In this case, fixing the low supply of labour by greatly increasing the incentive to work extra hours.
But more than that - after the state and tax burden grew because of the pandemic and the energy crisis, Hunt wants to argue the state should be smaller.
He wants to say that there should be efficiencies in public spending that should fund a lower tax burden - and he feels this will be a dividing line at the election.
However, perhaps his biggest call right now is to tell the electorate that the economy is at a turning point. That would have been clearer if the picture from the turn of the year had endured - that the economy maybe was starting to grow and that interest rates were starting to fall.
But that picture did not last. The interest rates facing government debt increased. The ONS said that we dipped into a recession at the end of last year. And the Bank of England is not yet ready to cut interest rates.
Planes, vapes, and non-doms could raise revenue
As we just reported, today is not just about National Insurance and income tax - although they are likely to make the headlines.
As well as tax cuts, chancellor is also considering how to raise revenue, including a new tax on vapes.
Currently, vaping products are subject to VAT - but unlike tobacco, they do not have a dedicated levy.
Air travel for business class passengers could become more expensive with a possible an increase in Air Passenger Duty for that class of traveller.
Another possibility is a windfall tax for oil and gas companies. This was introduced in 2022 and is due to run until 2028. Reports suggest it could be extended.
The government is also reportedly exploring the option of scrapping the tax status on non-doms - people who live in the UK, but whose home for tax purposes is overseas.
Non-domiciled people, often referred to as non-doms, only pay UK tax on money earned in the UK.
With four weeks to go, there are calls for Household Support Fund to be extended
Colletta Smith
Cost of living correspondent
We've been focusing on National Insurance and income tax so far - but today's budget will see a whole range of economic annoucements.
For example, charities and councils will be watching to see whether the chancellor extends the Household Support Fund.
Over the past two and a half years, £2.5bn has been given to local councils, who have then distributed it via food banks, warm spaces, holiday clubs, food vouchers and direct grants.
The fund is due to end in four weeks' time and Barnardo's charity has told the BBC this would be "catastrophic".
A cross-party group of 160 councils in England has called for the "vital lifeline" to be extended. But the government says other benefits are rising to help cover living costs.
Among the hundreds of thousands of families who have received help from the fund are Israel and Osaretin Asemotas.
They received a grant from Oldham Council via Homestart Host, which they used to pay for baby formula, nappies and energy bills.
"It's been a relief to get the help, but we know it will still be a struggle in the months and years ahead," says Israel.
"I feel for those who are going to be in my own shoes. This is one of the things that can really help."
What are the fiscal rules?
Most wealthy countries have some sort of fiscal rules which help them maintain credibility with the financial markets - a key source of government borrowing.
The interest rates investors charge on government debt or mortgage debt take their cue from how much risk is attached to lending money.
A good example of what happens when financial markets get rattled is the mini-Budget in 2022. In it, short-lived Prime Minister Liz Truss and her chancellor Kwasi Kwarteng unveiled £45bn in tax cuts, but failed to spell out how they’d actually pay for them – unleashing chaos and a sharp rise in mortgage rates.
Under Jeremy Hunt, the government has two key fiscal rules. One is to get debt, which is the borrowing stacked up over the years, falling as a percentage of national income – or gross domestic product (GDP) –by 2028-29.
The other is for public sector net borrowing, which is the annual deficit, to be less than 3% of GDP by the end of the period.
The choice of rules is up to the government – but the current format has been criticised by some economists for being too loose. To comply, debt has to only fall in the fifth year of the forecast, and can rise further in the meantime.
UK tax take approaching post-Second World War levels
As Dharshini just reported, UK tax levels - compared to GDP - are approaching the highest levels since just after the Second World War.
As a reminder, one of the government's fiscal rules is is to get debt falling as a percentage of GDP by 2028-29. We'll have more on those rules next.
How high is the UK's tax compared to other countries?
Dharshini David
Chief economics correspondent
Few people think they’re paying too little tax - but, relative to the size of our economy, we pay slightly less tax in the UK than the average for wealthy countries.
As a proportion of GDP, we pay more than the US but less than most European nations. However, that proportion - the UK's "tax burden" - is currently predicted to rise to the highest level since the Second World War.
Conversely, government spending is slightly higher, compared to the size of our economy than the average for wealthy countries.
So the gap between the two - the deficit, typically matched by borrowing - is slightly higher than our competitors’ average.
The differences between nations reflect some economic factors but are overwhelmingly political decisions - and ultimately, budgets are just that: political decisions.
'We're being squeezed by frozen income tax thresholds'
As we just reported, some Conservatives are calling for income tax to fall - rather than National Insurance.
New mum Charlotte Birchett says she wants to see the chancellor to unfreeze income tax thresholds “because they have been there for so long and people are still struggling”.
As a reminder, people in England, Wales, and Northern Ireland pay the 20% basic rate of income tax on earnings over £12,571, the higher 40% rate over £50,271, and 45% on earnings over £125,140. Those thresholds are expected to remain frozen until 2028.
Before taking maternity leave, Charlotte worked full-time. “We work hard,” says Charlotte, who is based near Manchester.
“We want to show that we’re doing a good job and we just feel that at the moment it is getting more and more difficult and we’re not really seeing any improvement.
"Even if when we get our pay review it’s still not really making a difference."
A tinge of Tory disappointment if income tax isn't cut
Henry Zeffman
Chief political correspondent
Of course, the most important lens through which to assess the National Insurance cut is economic — questions like will it boost growth, will it incentivise work, is it the right priority compared to spending on public services?
But Budgets fuse the economic with the political, especially in an election year. For many Conservative MPs the most important question is whether this tax cut will help them hold on to their seat at the election.
Many were desperate for personal tax cuts of any form in this budget — and so they are welcoming Jeremy Hunt’s reported 2p cut in National Insurance.
But in some quarters there is also a clear tinge of disappointment that it is seemingly not income tax being cut instead.
One former minister told me that they feared only income tax would “cut through” to voters because it is easier to understand, and affects more people.
They also pointed out that unlike National Insurance, income tax affects pensioners, who are a crucial part of the Tory electoral coalition.
Cabinet arrives in Downing Street before Budget speech
As Jeremy Hunt recovers from his run, government ministers are making their way to Downing Street to formally sign off the Budget.
Home Secretary James Cleverly, Northern Ireland Secretary Chris Heaton-Harris, Defence Secretary Grant Shapps have been spotted this morning.
Ministers including Andrew Mitchell, Esther McVey, Alex Chalk and Laura Trott have also walked into No 10 in the last few moments - all have ignored questions from the shouting press pack.
Hunt goes for morning run with Poppy
The chancellor is up bright and early before his lunchtime budget - here he is running near Downing Street this morning with his labrador, Poppy.
Can a second bash at National Insurance move the dial?
Chris Mason
Political editor
For the chancellor and the prime minister, with an election imminent, there is a rapidly shrivelling number of big set piece moments where the levers and stage of government can be commanded to attempt change; economic and political.
A stagnant economy and dire opinion poll ratings are the backdrop, coupled with the fear among many Conservative MPs that swathes of the electorate have stopped listening – whatever they now say.
The 2p National Insurance cut in the Autumn Statement didn't appear to shove the political dial.
Will having a bash at the same idea again work second time round?
Some Tories would like to see an income tax cut. A better headline, they think, but there’s a catch: it’s more expensive.
Labour reckon the government might cut income tax too. And Sir Keir Starmer will choose to agree with the tax cuts for workers. But, in so doing, create a spending headache for Labour if they win.
Will today's Budget mean drivers pay more for petrol?
Dearbail Jordan
Business reporter
No government has, since 2011, raised fuel duty - and it seems highly unlikely in an election year that Jeremy Hunt will break with that tradition today.
It means that duty on petrol and diesel will not be lifted in line with inflation. It is also widely expected that Hunt will extend a “temporary” 5p cut on fuel duty, announced in 2022, for another year - it was supposed to come to an end this month.
Capital Economics calculates both measures will cost the Treasury £6.2bn in total. But, with tens of millions of drivers on Britain’s roads, a rise in duty would go down like the proverbial lead (or unleaded?) balloon with voters.
Braverman and Patel call for income tax cut, rather than National Insurance
As we reported earlier, some Conservatives want a cut in income tax, rather than National Insurance - even though it costs the Treasury more.
Former home secretary Suella Braverman says "my preference would be 2p off the basic rate of income tax".
Meanwhile her predecessor, Priti Patel, is calling for the unfreezing of income tax thresholds. She also wants Jeremy Hunt to scrap the so-called "tourism tax" by reintroducing VAT-free shopping for tourists.
'We can't afford holidays any more'
Shanaz Musafer
Business reporter
Aga Szedzianis and her husband, who are both associate architects, earn just over £50,000 each.
But she says, with price rises, the cost of childcare and their mortgage soon set to go up by £500 a month, things are getting "quite uncomfortable".
"We had to stop paying pension contributions recently. We can afford only what's now and not the future,” says the 37-year-old mum-of-two from Newham, east London. "We can't afford holidays anymore."
Aga would like to see income tax thresholds going up. Usually tax thresholds rise in line with inflation, but they have been frozen since 2021.
So as your pay goes up, a bigger portion of your income is taxed.
"The biggest help to us would be raising the threshold for paying 40% tax. If it was raised from £50,000 to £60,000, it would [potentially] give us £2,000 a year each."
As a reminder, the 40% rate of income tax starts in England, Wales, and Northen Ireland on earnings above £50,271. There are different rates in Scotland, which can set its own income tax.
Why cut National Insurance, rather than income tax?
Dearbail Jordan
Business reporter
Some Conservatives want a cut in income tax, rather than National Insurance. They argue it's more likely to be noticed by voters - and therefore a better election strategy.
But a cut in the basic rate of income tax would be more expensive, because it affects more people - including those who make money from property, as well as some pensioners.
In contrast, National Insurance affects just those in work.
So, a cut in the basic rate of income tax from 20p to 19p would cost the Treasury around £7bn a year. A 1p cut in National Insurance would cost the Treasury around £4.7bn per year.
(The 2p cut that's likely to be announced today will cost around £9bn - £10bn a year).
And, as my colleague Dharshini just explained, an NI cut would only partially offset income tax thresholds being frozen until 2028-29.
That means that while you may get a pay rise, it could drag you into a higher tax bracket.
Fiscal drag - the stealth tax that won't be in the Budget
Dharshini David
Chief economics correspondent
One of the biggest tax changes that may affect your payslip won’t be in today’s Budget.
In the past, governments typically lifted certain tax thresholds each year in line with inflation. But the thresholds at which taxes apply on income have been frozen for the last few years.
And the intention is for that to continue until 2029. It is what’s known as the fiscal drag and it means that as incomes rise, a larger part of your wage may go to government coffers than otherwise.
Official forecasts say it could increase the total number of taxpayers by four million by 2029, with an extra three million having been sucked into the 40% band.
The income threshold at which self-employed people, or small businesses have to register VAT has also been frozen at £85,000.
Fiscal drag is predicted to raise an extra £45bn for the Treasury by 2029 - so for the government it’s a big money-spinner.
Tories promised to fix the roof - but the house is burning down, says Labour
As expected, Labour has not welcomed the likely cut in National Insurance with open arms. Instead, shadow chancellor Rachel Reeeves has accused the Tories of overseeing "14 years of economic failure".
"The Conservatives promised to fix the nation's roof, but instead they have smashed the windows, kicked the door in and are now burning the house down,” she says.
"Taxes are rising, prices are still going up in the shops and we have been hit by recession.
"Nothing the chancellor says or does can undo the economic vandalism of the Conservatives over the past decade."
Labour also said any tax cuts today would be cancelled out by the continued freeze on income tax thresholds - meaning more people are dragged into higher bands as their pay increases.
We'll have more on that so-called "fiscal drag" from our chief economics correspondent, Dharshini David, next.
Hunt promises 'permanent' tax cuts
For a second time in less than four months, the Chancellor is expected to cut National Insurance for employees by 2p in the pound.
In quotes released overnight, Jeremy Hunt did not confirm the move - but he did pledge "permanent cuts" in taxation.
"Of course, interest rates remain high as we bring down inflation,” Hunt said.
"But because of the progress we've made because we are delivering on the prime minister's economic priorities we can now help families with permanent cuts in taxation.
"We do this not just to give help where it is needed in challenging times. But because Conservatives know lower tax means higher growth. And higher growth means more opportunity and more prosperity."
Welcome to the Budget 2024
Thanks for joining us on a big day for UK politics, economics - and the money in your pocket.
The Budget outlines the government's plans for raising or lowering taxes, and sets out spending on public services like the NHS, schools and police.
At 12:30 GMT, Chancellor Jeremy Hunt is expected to cut National Insurance by another 2p - that could save the average worker around £450 a year.
But that will just be one part of today's announcement - stay with us for all the news, reaction, and analysis.