Labour gives update on plans for National Insurance tax break

Labour has issued a statement on after calls for National Insurance to be reduced. Labour MP Nadia Whittome asked about the idea of lowering the tax for certain workers, in a written question in Parliament.

She asked specifically if Chancellor Rachel Reeves had looked at "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 Government. He said that to bring in a new tax relief, ministers would need to consider a "wide range of factors".

He explained: "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 said Labour is committed to helping those who are out of work with "personalised support" so they can find a job again.

The Government has a long-term ambition to increase the employment rate to 80 per cent, with the rate in the latest figures at 75.3 per cent for those aged 16 to 64. The figures showed 9.07 million people aged 16 to 64 are economically inactive, representing over a fifth of people in this age group.

Mr Tomlinson outlined the Government's future plans, saying: "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."

Labour pledged previously during its General Election bid that it would not increase taxes on "working people", including income tax and National Insurance,

Chancellor Rachel Reeves instead increased the rate National Insurance that employers pay, as announced in the Autumn Budget 2024. The tax increased from 13.8 per cent to 15 per cent, from April 2025.

One benefit of paying National Insurance is it builds up your state pension entitlement. You typically need 35 years of contributions to get the full new state pension, which is currently £230.25 a week.

You can claim this from age 66, but it is scheduled to rise to 67 by 2028 and then to 68 between 2044 and 2046, with the possibility of a future review that could accelerate the 68 increase or even lead to higher ages.