Spring Budget 2024: National Insurance Changes

Tax Cuts for Workers:

• For employees and the self-employed, NIC thresholds are frozen until 2028, while contribution rates are seeing significant reductions.
• The main rate for employee NIC has been cut from 10% to 8%, (down from 12% in November 2023) saving workers up to £1,508 per year.
• The main rate for self-employed NIC has been slashed from 8% to 6%, (down from 9% in November 2023) offering savings of up to £1,131 annually.
• These cuts effectively counterbalance income tax increases due to frozen personal allowances, specifically targeting working individuals.

Contribution Limits and Scotland:

• The upper earnings limit for both employee and self-employed contributions remains unchanged, aligning with the 40% income tax threshold (£50,270/year) and frozen until 2028.
• Scottish taxpayers face a unique situation. Due to the lower threshold for their higher income tax rate, they could be liable for both full NIC (8%) and higher income tax (42%) on the same income band.

Class 2 NIC Update:

• Flat-rate Class 2 NIC, which previously secured state pension entitlement for the self-employed, is undergoing changes.
• As of April 6th, 2024, those earning above £6,725 will no longer need Class 2 to qualify for benefits, saving them £179.40 annually.
• Individuals earning below this threshold can still pay Class 2 voluntarily to maintain a full contribution record.
• The government plans to consult later this year on abolishing Class 2 for low earners altogether.