The 1.25% rise in National Insurance will be reversed from 6 November, the Chancellor Kwasi Kwarteng has announced.
The government will also cancel the planned health and social care levy – a separate tax which was coming into force in April 2023 to replace this year's National Insurance rise. The chancellor is also set to confirm that the increases to dividend tax rates will be scrapped from April 2023 in his growth plan today.
Chancellor Kwasi Kwarteng said: "Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
"Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn."
The government is implementing the changes as soon as possible. Most employees will receive a cut to their National Insurance directly via payroll in their November pay, with some receiving it in December or January, depending on the complexity of their employer's payroll software.
UKHospitality chief executive Kate Nicholls said that, following plans announced earlier this week to cap business energy bills, it was "more excellent news" for hospitality, and would "help businesses reduce their costs as they attempt to return to profitability while facing a perfect storm of financial pressures, including the interest rate rise, VAT back to 20%, and the frankly unfair business rates regime".
"This announcement is particularly welcome, as UKHospitality has long campaigned for an employer NICs regime that supports job creation, which this move will certainly help towards," she added.
Separately, UKHospitality is urging further government support for the industry through a VAT rate cut and the reform of business rates.
The 1.25% NI rise was introduced by former chancellor Rishi Sunak in April.
Photo: Simon Dawson / No 10 Downing Street