Could the cut to National Insurance make you better off?
In his 2023 Autumn Statement, the Chancellor announced a major change to how National Insurance Contributions (NICs) will be paid from 2024.
If you’re employed, a key change comes into effect on 6 January, and it could mean an estimated 27 million UK workers will be hundreds of pounds a year better off. Read on to discover more about the changes and what they might mean for you.
Before you do though, let’s look at what NICs are in more detail.
NICs help to fund the State Pension and other benefits
According to the BBC, NICs are the second biggest source of money for the government. In many ways it’s similar to Income Tax, however it’s paid by employers and employees.
Both pay a fixed percentage of the money you earn to the government that’s used to pay the State Pension and several other benefits. Up until April 2024 most self-employed people will pay NICs, something we’ll return to in a moment.
The amount of State Pension you receive in retirement typically depends on the amount of NICs you’ve paid during your working career.
A cut to National Insurance Contributions
During his Autumn Statement in November, the Chancellor abolished Class 2 National Insurance Contributions (NICs) for those who work for themselves. Furthermore, Class 4 NICs for the self-employed will drop from 9% to 8% for earnings between £12,570 and £50,270.
The changes to Class 2 and Class 4 NICs come into force at the start of the 2024/25 tax year.
However, the Chancellor’s decision to reduce the main Class 1 NICs for employed people comes into effect on 6 January 2024. As such, those earning between £12,570 and £50,270 will pay 10% after this date, instead of 12%.
This means that if you’re earning more than £50,270, you could save more than £750 a year depending on your tax code and circumstances.
Get in touch
If you would like to discuss how the change to NICs could affect your finances, please call us on 01527 577775 or speak to one of our advisers, as we’d be happy to help. If you would like to see how the change might affect how much NICs you pay a year, check out the Which? calculator.
Friday 5 January 2024