Chancellor Jeremy Hunt has announced a 2 percentage point cut to the the main rate for employee National Insurance from 12% to 10%.
Speaking during today's Budget, Hunt said that 27 million people would benefit from the reduction, which is worth £450 for someone on average earnings.
The change will come into force from the 6th of January.
Tax cuts were widely rumoured after infation dropped to a two-year low of 4.6% last month, meaning the Government has reached its target of halving inflation from its 10.7% starting point.
Hunt also announced tax cuts for self-employed people worth £350 per year.
The government is abolishing Class 2 National Insurance, which will save workers £192 per year, and is reducing Class 4 National Insurance from 9% of earnings to 8%.
The self-employed tax changes will come into force from April next year and will benefit nearly two million self-employed people, Hunt says.
