The UK Government has now revealed plans set out within the Autumn Statement for various changes and updates to Tax and National Insurance Rates coming into effect on 6th January 2024.
Within the statement released by the Chancellor of the Exchequer, was a rundown of changes being implemented in how National Insurance is paid, which means there are some key points to note which can help avoid costly payroll mistakes after the new year.
Main Rate Reduction for Employees (Class 1 NICs):
Starting January 2024, there will be a reduction in the main rate of Class 1 NICs for employees from 12% to 10%. This change aims to alleviate the burden on employees and promote economic stability within the United Kingdom. The reduction will reduce the overall tax and NI bill for the average worker in the 24-25 tax year by £1,000 and the new combined base rate of 30% across tax and NI is the lowest since the 1980s in the UK.
Class 4 NICs Reduction for the Self-Employed:
Commencing 6th April 2024, self-employed individuals will experience a reduction in Class 4 NICs from 9% to 8% contributing to a more favourable environment for independent workers – who make up around £2 million individuals in the UK.
Class 2 NICs Exemption for Profits Above £12,570:
Effective April 6, 2024, self-employed individuals with profits exceeding £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits such as state pension. This measure aims to support entrepreneurs and small business owners.
Class 2 and Class 3 NICs Rates Freeze:
The government has frozen Class 2 and Class 3 NICs rates at their 2023 to 2024 levels for the 2024 to 2025 tax year, providing stability in contribution rates.
Freeze on Class 1 Lower Earnings Limit and Class 2 Small Profits Threshold:
For the 2024 to 2025 tax year, the Class 1 Lower Earnings Limit and Class 2 Small Profits Threshold will remain frozen at £6,735, ensuring consistency in thresholds.
Extension of NICs Relief for Employers Hiring Former Armed Forces Members:
Employers hiring former members of the UK regular armed forces will continue to benefit from NICs relief, now extended to cover the 2024 to 2025 tax year.
The full rundown of National Insurance Rates and Thresholds effective of 6th April 2024 are as follows:
| NICs Primary Threshold / Lower Profits Limit | £12,570 (annual) |
| Class 1 NICs Main Rate (from 6 January 2024) | 10% |
| Class 4 NICs Main Rate | 8% |
| Lower Earnings Limit | £6,396 (annual) |
| Small Profits Threshold | £6,725 (annual) |
| Class 2 Rate (for those paying voluntarily) | £3.45 (per week) |
| Class 3 Rate | £17.45 (per week) |