Boris Johnson tax cuts: What does the NI policy Boris accidentally announced mean for you?
Boris Johnson made the key announcement while speaking to workers in Teesside on the election campaign trail. Pressed by an employee about whether a Conservative government would help "people like us", not just the rich, the incumbent Prime Minister blurted out plans to raise the national insurance threshold.
Mr Johnson announced he wanted to raise the national insurance threshold to £12,500, a major tax cut in the yet-to-be-published Tory manifesto.
However, it soon emerged the policy was, in fact, not quite to cut and dry.
Instead, the policy will see the Tories pledge only to raise the threshold to £9,500 next year, then lift it gradually over many years until it reached the target £12,500.
Currently, the NI threshold is £8,424 – if you earn less than that annually, you don't have to pay NI contributions.
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So what would the Tory policy mean for you?
Mr Johnson said bringing in the £9,500 threshold sooner would "help with the cost of living" and "put £500 in the pocket of everybody" – although a later press release claimed the saving would be around £100 per person.
However, both of those figures are higher than the estimate of the independent economic think tank, the Institute for Fiscal Studies (IFS) calculated.
The IFS said the initial threshold would save workers about £85 per year and cost the government £2bn.
And then as the threshold slowly rose to 12,500, workers could save up to £465 a year, and cost the government £11bn.
As it stands, everyone earning above the threshold and up to £46,350 per year pays 12 percent of their earnings to NI contributions.
Xiaowei Xu, a research economist at the IFS, said reducing the NI threshold was the "best targeted way of helping low earners if restricting oneself to the direct tax system".
However, he added: "If the intention is to help the lowest-paid, raising the NICs threshold is an extremely blunt instrument.
"Less than 10 percent of the total gains from raising NICs thresholds accrue to the poorest fifth of working households."
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Mr Johnson appeared caught off guard by the question in Teesside, and seemed to stumble into the announcement, and then backtracked over the course of the day.
When asked if he'd be helping all people, not just the rich, he said: "I mean low tax for working people.
"If you look at what we are doing and what I said in the last few days, we are going to be cutting national insurance up to £12,000.
"And we are going to make sure we cut business rates for small businesses, we are cutting tax for working people, by the way."
Tory advisers were taken by surprise by Johnson letting slip the announcement, which was due to be a flagship element of the manifesto briefed to Sunday newspapers.
The manifesto is due to be published on Sunday, which Tory sources said was aimed for maximum impact on the weekend evening news bulletin.
He later had to correct the figures in an interview with the BBC, revising it to a £9,500 threshold next year, with an eventual goal of £12,500.
Mr Johnson said: "We want to operate in a prudent way, but we do want to help now with the cost of living while simultaneously having the funds we need to invest into the NHS, police officers and education as well."
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