Cuts to National Insurance: Reminders About Changes

In November 2023’s Autumn Statement, the government announced some National Insurance (NI) changes. Some of these changes went into effect in January 2024, whereas others will come into effect on 6 April 2024. Here is a reminder of the changes.

Cut to the main rate of Class 1 employee NI contributions from 12% to 10%

This reduction received the most headlines. This change went into effect from 6 January 2024, and you have likely already made this adjustment.

In some cases, employers were not able to make the change in time due to software not being ready. If that is the case for you then an incorrect amount of NI will have been deducted from your employees and this will need correcting. Details on how to do so are here: https://www.gov.uk/payroll-errors/correcting-your-fps-or-eps But, please feel free to contact us if you need any help.

HM Revenue and Customs (HMRC) have recently confirmed that the 2% cut also applies to the married woman’s reduced rate of NI contributions, where the rate has dropped from 5.85% to 3.85%. The married woman’s reduced rate of NI contributions applies to married women who opted in before the scheme ended in April 1977.

Cut to the main rate of Class 4 self-employed NI contributions from 9% to 8%

Class 4 NI applies to the taxable profits of a self-employed business. It is calculated when your self-assessment tax return is prepared and collected as part of your income tax bill.

This cut comes into effect for profits earned from 6 April 2024 onwards. There is nothing you need to do to benefit from this cut, it will be automatically applied when your tax bill is calculated.

Removal of liability to pay Class 2 self-employed NI

Sometimes known as the self-employed ‘stamp’, Class 2 NI has been a feature for self-employed taxpayers for many years. It is quoted by HMRC as a weekly rate (£3.45 per week for the 2023/24 tax year) and is usually collected as part of your self-assessment tax bill.

From 6 April 2024 the liability to pay this has been removed. For 2024/25, if your trade profits are above £6,725, you will accrue entitlement to state benefits without paying Class 2 NICs so the charge effectively becomes £nil. However, if your trade profits are below £6,725 and you wish to continue accruing entitlement to state benefits, you’ll need to pay class 2 NICs on a voluntary basis.

If you have any concerns or questions about the NI you are paying, please contact us, we will be happy to help you!