National Insurance Changes

The Spring Budget 2024 announced more cuts to National Insurance Contributions (NICs), starting from April 6, 2024. This is the second time NICs are being cut and it affects employees, including company directors, and the self-employed.

Employers will still pay Class 1 secondary NICs at 13.8%, which might lead them to prefer hiring workers who are not classified as employees. For employees, the main rate of Class 1 NICs will drop from 10% to 8% for earnings between £12,570 and £50,270. The 2% charge on earnings above £50,270 will stay the same.

Here’s a summary of the changes to Class NICs:

12% until January 5, 2024

10% from January 6, 2024, to April 5, 2024

8% from April 6, 2024

Company directors had a more complicated situation after the first NICs cut announced in the Autumn Statement 2023 because their contributions are calculated annually. For 2023/24, their NIC rate was an annualized 11.5%. The new change from the Spring Budget simplifies this, making the rate 8% from April 6, 2024. Directors will now need to think more about how they pay themselves, as the NICs cut makes giving bonuses cheaper.

For the self-employed, the Class 4 NICs rate was already set to drop from 9% to 8% on April 6, 2024, as announced in the Autumn Statement 2023. The Spring Budget reduces this further to 6% from the same date. There will still be a 2% charge on earnings above £50,270. Additionally, from April 6, 2024, self-employed people won’t have to pay Class 2 NICs anymore, but they can choose to make voluntary Class 2 contributions. This is useful for those earning less than £6,725, as it helps them qualify for benefits like the State Pension.

By proactively advising clients on utilising the reduced NIC rates, structuring remuneration packages, and ensuring compliance with the new regulations, Scotia Financial can help businesses optimise their financial strategies and adapt to the evolving landscape of NIC contributions effectively.

If we can support your business, please get in touch.