National Insurance
As anticipated by many in advance of the Budget, further reductions were announced to the rates of National Insurance contributions payable by employees and self-employed workers. No changes were made to the rate of employer contributions (known as secondary contributions) so employers will continue to pay 13.8% employer contributions.
Employee National Insurance Contributions
The main rate of Class 1 Employee National Insurance is reduced by a further 2% from 10% to 8% starting with pay periods from 6 April 2024 onwards.
- This means that an employee earning £50,270 or more a year will see a further annual saving in the amount of NIC’s payable of £754 per year, or £62.83 per month;
- This represents a total saving of over £1,500 a year since the reduction from 12% in January 2024; and
- For an employee on £35,000 a year, this represents a saving of almost £900 a year including the first reduction from 12% in January 2024.
Self-employed workers
From 6 April 2024, the main Class 4 National Insurance contribution rate paid by the self-employed was set to reduce to 9%. This has also been reduced by a further 2% to 6%.
Combined with the abolition of the requirement to pay Class 2, as announced in November 2023, this will save an average self-employed person on £28,000 around £650 a year.
According to the government, the combined effects of these reductions to National Insurance means that a person on the average wage now has the lowest effective personal tax rate since 1975.
ISAs
At the Spring Budget 2024, the government announced the introduction of the UK ISA. The new £5,000 allowance, in addition to the existing £20,000 ISA allowance, will provide a new tax-free savings opportunity for people to invest in the UK, while supporting UK companies. The government have opened a consultation on implementation which will close on 6 June 2024.
British Savings Bond
National Savings & Investments will be releasing a three-year fixed-rate bond in early April 2024. The rate has not yet been announced.
High-Income Child Benefit Charge
The government announced plans to remove the unfairness of the current High Income Child Benefit Charge (HICBC) by moving to a system based on household rather than individual incomes by April 2026. A consultation on this will be issued in due course.
- In the meantime, the HICBC threshold will increase from £50,000 to £60,000 from 6 April 2024;
- The charge is calculated as 1% of Child Benefit for every £200 income above £60,000 (previously 1% for every £100 income above £50,000); and
- If your income exceeds £80,000 the charge is equal to the amount of the Child Benefit payment.
This measure is expected to take 170,000 families out of paying the HICBC, saving nearly half a million families an average of £1,260 in 2024/25.
