Understanding recent National Insurance changes

In April 2024, significant changes were made to National Insurance contributions (NICs) in the UK, impacting both employees and self-employed individuals.

My blog explains how these changes may affect you.

Employees

From 6 April 2024, the rate of employee Class 1 NIC, on earnings between £12,570 and £50,270, has reduced from 10% to 8%. This means an increase in take-home pay of £2 for every £10, for those in this bracket.

The rate of Class 1 NIC on earnings above £50,270 remains at 2%.

An individual earning the minimum wage of £11.44, working a 40-hour week, will see a saving of £225 per year. The saving increases to £754 per year for those earning in excess of £50,270.

Have you seen an increase in your take-home pay? If not, please get in touch with us to discuss how we can help.

Self-employed individuals

As with employed individuals, sole traders and those trading in partnerships also saw a reduction in National Insurance rates. However, due to the Self Assessment cycle, the impact of this won’t be felt until January 2026.

Class 4 NICs, the main NIC charged on profits between £12,570 and £50,270, has reduced from 9% to just 6%. In monetary terms, this results in a £223 saving for profits of £20,000, rising to £1,131 where profits are in excess of £50,270.

The Class 4 NIC rate on earnings above £50,270 remains at 2%.

Furthermore, the rate of Class 2 NIC, the liability paid to achieve a qualifying year for state benefits, remains at £3.45 per week, being £179 for the year.

Need help?

We specialise in helping businesses of all sizes make sure that they comply with their reporting requirements and are paying the correct amount of tax. If you need help with your accounts and/or Self Assessment tax returns, please get in touch.

If you have any questions about this topic or any other way you could be saving tax, please get in touch with your usual contact at Larking Gowen. You can find contact details on the Our People section of the Larking Gowen website, or call 0330 024 0888 or email enquiry@larking-gowen.co.uk.