Changes to National insurance contributions for employees and self-employed persons for 2024

There will be a cut in the main rate of Employee’s National Insurance contributions from 6 January 2024. This will see Class 1 National insurance contributions reduced by 2%, from 12% to 10%, in a change set to benefit some 27 million employees.

This reduction will only apply to annual earnings between £12,570 and £50,270, meaning that the maximum saving is £754 a year. Average earners, bringing home £35,400, will be £450 better off. As the main rate will be reduced from 6 January 2024, employees will, unusually, see a benefit before the start of the next tax year.

How are these reductions in National insurance contributions effect some people’s annual gain?

1. A senior nurse with 5 years of experience on £42,618 will receive an annual gain of £600.
2. An average full-time nurse on £38,900 will receive an annual gain of over £520.
3. An average police officer on £44,300 will receive an annual gain of over £630.
4. A typical junior doctor on £63,000 will receive an annual gain of over £750.
5. A cleaner working night shifts on £21,000 will receive a gain of £170.
6. A typical self-employed plumber on £34,400 will receive an annual gain of £410.
7. An average teacher on £44,300 will receive an annual gain of over £630.
8. A hard-working family with 2 earners on an average earnings of £35,404 will be £900 better off.

National insurance contributions changes for self-employed individuals

The first change for the self-employed concerns the removal of Class 2 national insurance contributions (Class 2 NIC). This means that self-employed people with profits above £12,570 will no longer be required to pay Class 2 national insurance contributions from 6 April 2024. Class 2 national insurance contributions are currently paid by the self-employed to qualify for contributory benefits such as the state pension.

This change effectively abolishes Class 2 national insurance contributions for some two million self-employed people. The self-employed benefitting from this change will continue to receive access to contributory benefits.
Those currently paying Class 2 national insurance contributions voluntarily will still be able to do so at the same rate. This includes those with profits under £6,725 (Small Profits Threshold) and others who pay Class 2 National insurance contributions voluntarily to access contributory benefits, including the State Pension. The weekly rate for making voluntary Class 2 National insurance contributions will be frozen at the current rate of £3.45 for 2024-25, rather than rising by CPI to £3.70. The Small Profits Threshold will also remain frozen at £6,725 for 2024-25.

Secondly, the Chancellor announced that the main rate of self-employed national Insurance, Class 4 national insurance contributions, on all earnings between £12,570 and £50,270 will be cut by 1%, from 9% to 8% from April 2024. This is worth £350 for the average self-employed person on £28,200.