The cancellation of the 1.25 percentage point hike in National Insurance came into effect on Sunday.
The hike was introduced by Boris Johnson’s government, with Rishi Sunak as Chancellor, in April and reversed by former Chancellor Kwasi Kwarteng in his mini-budget last month.
The reversal of the National Insurance hike is one of the few economic policies introduced by Liz Truss and Kwarteng that was not scrapped by new Chancellor Jeremy Hunt and remained in place with Sunak as Prime Minister .
The levy was devised by Sunak when he was Chancellor to pay for social care and deal with the NHS backlog.
In January, Johnson and Sunak insisted it was right to continue the “progressive” policy.
“We need to clear the Covid backlog, with our health and social care plan – and now is the time to stick to that plan. We need to move forward with the health and care tax. This is the right plan,” they said.
“It’s progressive, in the sense that the burden falls most on those who can most afford it.
“Every penny of this £39billion will go towards these crucial goals – including nine million more checks, scans and operations, and 50,000 more nurses, as well as strengthening social care.”
When announcing the cancellation, the Treasury said most employees would receive a reduction in their National Insurance contribution directly through their employer’s payroll in their November payroll, although some may be deferred to December or January.
The levy was expected to bring in around £13billion a year to fund social care and deal with the NHS backlog that has built up due to the Covid pandemic.
Additional reporting by PA Media.