When to expect the cut in national insurance

A bill implementing national insurance contribution (NIC) changes announced in the government’s autumn statement is being debated in the House of Commons today.

What is the purpose of the bill?

There are three changes the bill will introduce:

1. A cut in the main rate of NICs paid by employees (class 1 NICs) from 12% to 10%.
2. A cut in the main rate of NICs paid by the self-employed (class 4 NICs) from 9% to 8%.
3. The cancellation of the requirement for the self-employed to pay class 2 NICs. Currently, you pay these when your annual profit exceeds a certain level. The current threshold is £12,570.

When will the changes come into force?

The reduction in class 1 NICs applies from 6 January 2024.

The changes to NICs for the self-employed come into force from 6 April 2024.

Which parts of the UK are included?

The measures apply to the whole of the UK.

How will I be affected by the changes to NICs?

The 2% cut to class 1 NICs for employees is expected to benefit over 27 million employees in 2024/25. Basic-rate taxpayers are predicted to save an average of £304 a year, higher-rate taxpayers £647 a year, and additional-rate taxpayers £707 a year.

The 1% reduction in class 4 NICs for the self-employed is set to benefit over 2 million people in 2024/25. Basic-rate taxpayers are predicted to save an average of £117 a year, higher-rate taxpayers £322 a year, and additional-rate taxpayers £358 a year.

Removing the requirement to pay class 2 NICs is expected to benefit 1.9 million people in 2024/25. The average saving is predicted to be £186 a year.

Still paying more tax

The Office for Budget Responsibility has pointed out that the latest NICs changes offset just under a quarter of the personal tax rises announced by the government in the 2021 spring budget and the 2020 autumn statement.

These previous tax changes included freezing the personal allowance and the higher-rate threshold from 2022/23 to 2027/28.

By freezing tax allowances and thresholds, instead of increasing them in line with inflation, the government makes sure, as taxpayers’ earnings rise, more of their income is taxed and more of what is taxed falls into higher tax bands.