07 Mar National Insurance Cut – April 2024
Budget Spring 2024: National Insurance Cut
Yesterday the chancellor announced changes to NI for employed and self-employed.
The chancellor cut the main rate of national insurance contributions (Nics) paid by workers from 10% to 8% with effect from 6 April 2024, which he said would benefit 27 million workers. This is the second change since January 2024 – NI saw a reduction in rates from 12% to 10% on 6th January 2024.
He also announced changes to the national insurance paid by those who are self-employed.
The Treasury says that the average worker on £35,400 will save more than £900 a year as a result of the cuts in January and April.
Why do we pay National Insurance?
National insurance is paid into the national insurance fund which goes towards state benefits. In some years the government tops up the fund, while in others it uses the surplus for government expenditure elsewhere.
National insurance buys workers an entitlement to a range of state benefits.
Those who have built up enough years of contributions qualify for the basic state pension, while class 1 and class 2 contributions buy entitlement to employment and support allowance, maternity allowance and bereavement support payment.
You need approximately 35 full NI years to get the full state pension and in some cases, if you retire earlier for example, you may need to top it up. You have until 5 April 2025 to buy back any missing national insurance years from 2006 to 2016. You can check your national insurance record here: gov.uk/check-national-insurance-record
How much do we pay now?
NI is only charged on employees earnings between £242 and £967 a week, or £1,048 and £4,189 a month, so currently they will pay 10% in class 1 national insurance contributions. They pay 2% on all earnings above £967 a week/£4,189 a month.
And the changes
From 6th April the rate will change to 8% in class 1 national insurance contributions for those earning over £242 per week and remain at 2% above £967 a week.
The government will reduce the class 4 self-employed NICs rate from 9% to 6%. It will also abolish class 2 self-employed NICs.
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