Chancellor Kwasi Kwarteng has announced that April’s National Insurance hike is to be reversed from 6 November.
The 1.25% rise was introduced under former chancellor Rishi Sunak, but during the Tory leadership race Liz Truss pledged to change it.
Mr Kwarteng made the announcement ahead of a “mini-budget” on Friday.
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He 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.”
The Treasury said most employees will receive a cut to their national insurance contribution directly via their employer’s payroll in their November pay, although some may be delayed to December or January.
They calculate that almost 28 million people will keep an extra £330 of their money on average next year, whilst 920,000 businesses are set to save almost £10,000 on average next year thanks to the change
In a tweet, Mr Kwarteng called it a “tax cut for workers”.
The tax hike was put in place to help fix the NHS backlog and fund social care sector improvements. It was due to raise around £13bn per year.
However, Ms Truss argued it was wrong of her party to break its 2019 manifesto commitment not raise taxes, and said the extra funds can be raised through general taxation.
The chancellor confirmed today that the funding for health and social care services will be maintained at the same level as if the levy was in place.
MPs are expected to vote on repealing the health and social care levy once they return from party conferences in October.
Downing Street said the repeal Bill was part of the government’s commitment to “a low tax, high growth” economy.
“This is delivering on a commitment the PM made on the (Tory leadership) campaign trail,” a No 10 spokeswoman said.
The move comes ahead of Chancellor Kwarteng’s “fiscal event” on Friday when he will set out more details of the government’s plans to cut taxes, including scrapping a planned rise in corporation tax.