Major changes were announced to the rates of National Insurance Contributions payable by employees and self-employed workers. The thresholds for payment of NICs has not been changed. Disappointingly there were no changes to the rate of employer contributions (known as secondary contributions) and so employers will continue to pay 13.8% employer contributions as now.
Employee National Insurance Contributions
The main rate of Class 1 employee National Insurance is reduced by 2% from 12% to 10% starting with pay periods from 6 January 2024 onwards.
This means that an employee earning £50,270 a year will see an annual saving in the amount of NIC’s payable of £754 per year, or £62.83 per month. For an employee on £35,000 a year they will see a saving of almost £450 a year.
The cost of this measure to the Treasury is projected to be nearly £9 billion in lost revenue in the first full tax year it is effective which will be 2024/25.
Employers National Insurance Contributions
The zero employer’s National Insurance rate for hiring veterans is extended for a further year to 5 April 2025.
This means that businesses will continue to pay no employer NI up to annual earnings of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.
Self-employed workers
From 6 April 2024, the main Class 4 National Insurance Contribution rate paid by the self-employed reduces from 9% to 8%.
Class 2 flat rate contributions, commonly referred to as the ‘Stamp’ and currently £3.45 per week (increasing to £3.70 from 6 April 2024), will only be payable, on a voluntary basis, by those earning less than £6,725 per annum.
Class 2 contributions secure entitlement to certain state benefits, notably the state retirement pension. Those who earn £6,725 or more will have their entitlements protected.
