LONDON (Reuters) -British finance minister Jeremy Hunt on Wednesday announced a 10 billion-pound ($13 billion) tax cut for 27 million workers for a second time in under four months before a national election expected later this year.
Hunt said the government would reduce the rate of social security contributions, known as National Insurance Contributions, by 2 percentage points for employees and the self-employed, to help encourage people back to work and deliver a high wage, high skill economy.
The cut, effective from April, would be worth about 450 pounds ($572) a year for an employee and 350 pounds for someone self-employed, he said.
"We need a simpler, fairer tax system that makes work pay," Hunt told parliament in his annual budget speech.
In November, Hunt announced a 2 percentage-point cut to the main rate for employees and a 1 percentage-point cut for self-employed workers.
Hunt said the two tax cuts taken together were worth 900 pounds to the average worker.
It means employees earning more than about 12,570 pounds will pay 8% of their taxable salary on their earnings up to about 50,270 pounds, down from 12% last year, while self-employed workers pay 6%.
The government decided to cut national insurance rather than income tax because it would help encourage more people to work at a time when employers are struggling to fill vacancies.
But the government again announced a freezing of the earnings thresholds at which NICs begin to be paid by workers.
Freezing the thresholds, rather than allowing them to rise with inflation as is normally the case, pulls more workers into paying higher amounts of social security as their earnings rise, raising more money for the government.
Despite the announced cut, many Britons are paying more tax now than at the time of the last election, in large part because the Conservative Party has frozen the thresholds for basic and other income tax rates.
Paul Johnson, director of the Institute for Fiscal Studies think tank, said overall tax had "still risen a lot over this parliament" and low earners would lose out more from frozen tax thresholds than they gain from national insurance cuts.
($1 = 0.7860 pounds)