Recent Changes in National Insurance: What You Need to Know
As the longest month until payday approaches many of us may see a subtle increase in our Net (take home) Pay – what a nice treat. For those paid weekly you may have already seen this increase. This is due to the change in National Insurance (NI) rates announced by the Chancellor in the Autumn Statement (November 2023).
These changes are effective from 6th January 2024. Let’s take a closer look at what these adjustments mean and what you need to know…
Changes in Class 1 National Insurance Contributions:
One of the biggest changes is a 2% reduction from 12% to 10 % in the rate of Class 1 NI contributions we pay as employees.
Those that will benefit from the reduction are those earning above the Primary Threshold, the threshold where you begin to pay Class 1 NI.
Primary Threshold for 2023-2024
No Changes for Higher Rate Contributors:
There is no change to those paying the higher rate of NI, where the rate will stay at 2% on earnings above the Upper Earnings Limit of £967 per week or £4,189 per month.
Employers National Insurance:
There are no changes to the rate of Employer’s NI, this will remain at 13.8% for earning above £175 per week or £758 per month.
Changes for the Self-Employed from 6th April 2024:
For the self-employed, these modifications will not take effect until the new tax year starting on 6th April 2024 and only two significant adjustments have been announced.
Class 4 National Insurance Contributions:
Self-employed individuals earning above £12,570 per year will experience a 1% reduction in Class 4 NI contributions, dropping from 9% to 8%.This reduction applies to earnings between £12,570 and £50,270, while the higher rate of 2% on earnings above £50,270 remains unchanged
Removal of Class 2 National Insurance Contributions:
Perhaps the most noteworthy change is the elimination of Class 2 NI contributions for the self-employed. Currently set at a flat rate of £3.45 per week for those earning above £12,570 per year, this charge will be abolished from 6th April 2024.
So, while this means continued access to contributory benefits for those earning above £12,570, self-employed individuals earning below £6,725 per year will need to continue paying voluntary Class 2 NI contributions of £3.45 per week to qualify for these benefits.
These shifts in NI rates will hopefully bring a welcome relief for many employees and the self-employed.
If you require further information or need support with your payroll don’t hesitate to get in touch.