The Chancellor announced that the employed will see the starting rate for National Insurance fall from 10% to 8% from April 2024. This follows the previous 2% cut announced in the Autumn Statement in November 2023, which took effect on 6th January 2024. This means that come April 2024 the starting rate of National Insurance will have fallen from 12% to 8% for the employed in a matter of months.
The Chancellor also announced that the self-employed will see a further 2% cut to Class 4 National Insurance Contributions (NICs). In the Autumn Statement it was announced the rate of class 4 National Insurance was to fall from 9% to 8% from 6th April 2024. The new announcement in the Spring Budget means that the rate of Class 4 NICs will now fall from 9% to 6% from 6th April 2024. Class 2 NICSs will still be abolished from 6th April 2025.
What is National Insurance?
Whether you're employed or self-employed, you'll likely pay National Insurance in addition to income tax. Those in employment typically pay Class 1 National Insurance which were previously charged at 12% on income between £12,570 and £50,270 prior to the Autumn Statement in November 2023. Subsequent cuts announced in the Autumn Statement and the Spring Budget mean that salaried workers will pay NICs at a starting rate of 8% on wages up to £4,189 a month and a flat rate of 2% on everything above that from April 2024.
The self-employed pay Class 2 NICs at a flat rate of £3.45 a week and Class 4 NICs at a rate of 9% on profits above £12,570 but below £50,270. Following the Autumn Statement and Spring Budget, Class 4 NICs will now fall from 9% to 6% from 6th April 2024 and Class 2 NICs will be scrapped from the same date.
Making enough National Insurance Contributions (or accruing National Insurance credits) is how most people qualify for certain benefits including the state pension.
How much will you save with the new National Insurance cut?
The new tax rules will impact 29 million working people across the UK. Whether you're employed or self-employed, the new rules mean you're likely to take home more money each month after. A couple where both earners make the average salary of £35,400 will have £1,826 per year more when compared to their net pay before November's Autumn Statement. Similarly, those earning a salary above £50,268 will see a National Insurance saving of more than £1,500 per year, while someone on a salary of £25,000 will save around £500 per year. Self-employed people making more than £50,270 could see savings of more than £1,300 per year, while those making profits of £25,000 will see savings of around £500. Full details are given in the tables below.
Changes to National Insurance for the employed
The table below shows the savings you'll make from your NI contributions based on the cuts made in the Autumn Statement and the Spring Budget. You'll notice that the savings remain the same beyond the £50,000 threshold. This is because any income above £50,268 attracts a flat 2% National Insurance contribution rate.
Savings range from around £25 per month to around £125 per month depending on how much you earn.
| Annual salary before tax | Monthly savings with effect from 6th Jan 2024 (announced in the Autumn Statement) | Monthly savings with effect from 6th April 2024 (announced in the Spring Budget) | Total savings per month |
| £20,000 | £12.37 | £12.37 | £24.74 |
| £25,000 | £20.71 | £20.71 | £41.42 |
| £30,000 | £29.04 | £29.04 | £58.08 |
| £35,000 | £37.37 | £37.37 | £74.74 |
| £40,000 | £45.71 | £45.71 | £91.42 |
| £45,000 | £54.04 | £54.04 | £108.08 |
| £50,000 | £62.37 | £62.37 | £124.74 |
| £55,000 | £62.82 | £62.82 | £125.64 |
| £60,000 | £62.82 | £62.82 | £125.64 |
Changes to National Insurance for the self-employed
The table below shows the savings you'll make from your NI contributions based on the cuts announced in the Autumn Statement and the Spring Budget. None of the cuts take effect until 6th April 2024. You'll notice that the savings remain the same beyond the £50,000 threshold. This is because any profits above £50,270 attract a flat 2% National Insurance contribution rate.
Savings range from around £33 per month to nearly £110 per month depending on how much you make.
| Annual profit before tax | Total savings per month
(as a result of the Autumn Statement and Spring Budget National Insurance cuts) |
| £20,000 | £33.53 |
| £25,000 | £46.03 |
| £30,000 | £58.53 |
| £35,000 | £71.03 |
| £40,000 | £83.53 |
| £45,000 | £96.03 |
| £50,000 | £108.53 |
| £55,000 | £109.20 |
| £60,000 | £109.20 |
What do these changes really mean for you?
While many working people will technically have more money in their pockets come April 2024, the fact remains that tax thresholds remain unchanged despite a rise in salaries effectively increasing tax revenues at the expense of the lowest paid. Damien discusses this in more detail in podcast episode 438 which was recorded shortly after the Autumn Budget.
Tax thresholds have been frozen since 2021. Following Kwasi Kwarteng's disastrous mini-Budget back in 2022, Jeremy Hunt extended the freeze to 2027/28. Prior to 2021, the income tax personal allowance (currently £12,570) and the higher rate threshold (currently £50,270) moved up with inflation. There was speculation as to whether the Chancellor would unfreeze the tax threshold during this year's Budget given the rise in inflation and wages. However, the Chancellor opted to cut National Insurance instead.
A tax threshold increase would have benefited lower earners and higher earners, even if National Insurance rates had not been cut according to research from AJ Bell. It estimated that if tax thresholds had kept up with inflation, lower earners on £15,000 could save up to £390 per year even if National Insurance rates remained at 12%. Those making over £75,000 would have saved themselves around £1,100 in tax.
That being said, middle earners on between £35,000 to £50,000 are actually better off under a regime of NIC cuts. Had tax thresholds moved with inflation without the cut in National Insurance, those on £35,000 would have paid £366 more in tax each year, while those on £50,000 would have paid nearly £1,000 more in tax.
As such, if you're a "middle-earner", the government's NIC changes have been to your advantage. But, if you're a lower or higher earner, you would have been better off had the tax thresholds kept up with inflation and National Insurance been left alone.
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