The government announced that NI rates for millions of working people in the UK will reduce in 2024 to help with the cost of living crisis.
These changes will take effect on the 6th of January for employees and from the 6th of April for those who are self-employed.
Employee National Insurance contributions
The main rate of class 1 employee National Insurance (NI) contributions was reduced from 12% to 10% from the 6th of January 2024.
This measure reduces the main rate of NI by 2 percentage points. Employees will pay NI at a rate of 10% instead of 12% on earnings between £12,571 and £50,270.
This mid-tax year change will have a positive impact on individuals and households across the UK by providing a tax cut for around 29 million individuals.
An average employee earning £35,400 will pay around £450.00 less in NI contributions in the 2024/25 tax year.
Directors National Insurance contributions
Directors’ NI is calculated on an annual basis and there would be 9 months at 12% and 3 months at 10% in 2023/24. Therefore, the blended annual director’s rate will be 11.5%. This will then align with the employee-based percentage of 10% from 6th April 2024.
Self-employed National Insurance contributions
For those who are self-employed, the main rate of Class 4 National Insurance contributions will reduce by 1 percentage point, from 9% to 8% on profits between £12,571 and £50,270.
The liability to pay the weekly Class 2 flat rate for those with profits above £12,570 from 6th April 2024 will also be removed.
Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently.
Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so.
An average self-employed person on £28,200 will save round £350.00 in the 2024/25 tax year.
It should be noted that actual impacts for individual taxpayers will vary according to individual circumstances.
