Changes to National Insurance Contributions
24th April 2024
The rate of National Insurance Contributions paid depends on your employment status, whether you are employed or self-employed and how much you earn. In last year’s Autumn Statement – as part of the National Insurance Contributions (Reduction in Rates) Act 2023 – the Chancellor announced a number of changes to the rates of National Insurance Contributions (NICs). These were followed by further change announcements in the Spring Budget in March.
An initial phase in January saw a reduction in Class 1 NIC rates for employees and this will shortly be followed by further changes for the self-employed.
The cuts are a government step to reduce the gap in NIC rates between employees and the self-employed, while also continuing the Chancellor’s programme of changes to stimulate and recover the economy.
Read our article to understand what this could mean for you and your contributions in the 2023/2024 tax year and beyond.
CHANGES FROM 6TH JANUARY 2024
For employees, changes were implemented earlier in January 2024, with a 2% reduction in the main rate of Employee National Insurance (Class 1 NICs) from 12% to 10%. This change impacted some 27 million workers within the UK earning between the thresholds of £12,570 and £50,270. According to government statements, the changes represent a saving of £450 for the average employee earning £35,400 per year.
At the same time Director NICs changed to use a blended approach of 12% prior to the changeover point of 6th January, and 10% thereafter – giving an overall blended rate of 11.5% to use in annual end-of-year calculations for 2023/2024 returns.
CHANGES FROM 6TH APRIL 2024
From April 6th we will see further changes in NICs.
The main rate of employee National Insurance will be further reduced from 10% to 8%.
For the self-employed, Class 2 NICs will be abolished, which currently cost £3.45 per week for self-employed individuals earning profits over £12,570. At the same time, they will see their rate of Class 4 NICs reduce from 9% to 6% for all earnings between £12,570 and £50,270. This will impact some 2 million self-employed people in the UK and represents a £650 saving for an individual with average annual profits of £28,000.
Importantly, state pension benefits will remain unchanged for anyone self-employed and earning over £12,570. Those with profits between £6,725 and £12,570 will continue to be able to access contributory benefits through a National Insurance credit without paying NICs. Likewise, those with profits under £6,725 will continue to be able to voluntarily pay Class 2 NICs while maintaining access to contributory benefits. The rate of £6,275 has been frozen in continued support for those self-employed on a lower income. The weekly rate of voluntary Class 2 NICs will be frozen at £3.45.
For both employees and the self-employed, the rate on earnings above £50,270 will remain unchanged at 2%.
SUMMARY OF CHANGES
HMRC has publicised a table of rates and thresholds going forward:
| NICs Primary Threshold/Lower Profits Limit | £12,570 (annual) |
| Class 1 NICs Main Rate (from 6th April 2024) | 8% |
| Class 4 NICs Main Rate (from 6th April 2024) | 6% |
| Lower Earnings Limit | £6,396 (annual) |
| Small Profits Threshold | £6,725 (annual) |
| Class 2 Rate (for those paying voluntarily) | £3.45 (per week) |
| Class 3 Rate | £17.45 (per week) |
Depending on your annual income, you will differ in the savings you will see following the final NIC changes. The table below shows savings at various income band points (rounded to nearest whole number).
| Annual Income Bracket | Employee Saving | Self-employed Saving |
| £25,000 | £248.60 | £254 |
| £35,000 | £448.60 | £354 |
| £50,000 | £748.60 | £454 |
| Over £50,270 | £754 | £556 |
WHAT TO DO NEXT?
If you are an employer or managing NIC payments for yourself or others, you will need to ensure that the new rates are implemented by the various deadlines. All up-to-date NIC rates can be found on the HMRC website as well as tables of thresholds for use within payroll calculations. You should always seek professional advice and guidance from your accountant or financial advisor.
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All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article.
