The threshold was supposed to increase by £300, but it will increase by £3,000 instead.
This is a £6 billion tax cut for 13 million people, or £330 a year.
“This is the biggest tax cut in a decade,” Sunak said.
He added that 70% of workers will see their taxes reduced by more than they will pay for the new levy.
The move comes as the Office for National Statistics announced that inflation in the UK hit 6.2% in February.
This is a 30-year high and the UK now has the second highest annual inflation rate among G7 countries after the US.
The government announced the tax change Last year with a 1.25 percentage point increase in national insurance contributions. This means that someone on a salary of £50,000 will pay £464 next year, or 10% more.
It was initially to pay the NHS backlog before it was used to fund social care.
With soaring energy bills, fuel prices and inflation figures, many had called for the hike to be delayed or removed.
This includes a panel of economists who warned the Treasury select committee in February that the timing of raising National Insurance contributions was wrong.
Reacting to the news, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: ‘The Chancellor has been firm in his determination to implement the Health and Social Care Tax, but his actions today at least helped low-income people by raising the threshold at which they would have to start paying it. These actions will put money back in their pockets at a time of rising costs.
However, in lifting the threshold, care must be taken to ensure that workers earning less than £12,570 a year do not lose access to vital National Insurance credits for the state pension. The state pension forms the backbone of most people’s pensions and therefore they should ensure they don’t suffer unnecessary gaps meaning they end up with less to retirement. »
She adds: “Many benefits come with automatic National Insurance credits. For example, Child Benefit, Universal Credit and Jobseeker’s Allowance will credit you automatically. Other benefits such as statutory sick pay will give you credits if you apply for them. It is therefore essential that people who fear that they will no longer receive credit checks from National Insurance see what benefits they are entitled to, so that these credits can be granted.
Another option for people looking to fill gaps in their state pension record is to buy voluntary national insurance credits. Each missing year costs around £800 and will give you 1/35th of your entitlement. During retirement, they can be a great way to increase your state pension entitlement. »