Spring budget – decreases to national insurance

The Chancellor announced further decreases to national insurance for employees and self-employed individuals in his March budget. From April class 1 national insurance contributions are reducing to 8%. This is a decrease of 2% in national insurance for employees. From April self-employed individuals will pay 6% class 4 national insurance contributions. This is a decrease of 3%, cutting the NI rate from 9% to 6% for class 4 contributions. Class 2 national insurance is abolished for the self-employed from April 2024.

Impact of the changes to national insurance rates for an employee

Class 1 national insurance decreased by 2% to 10% from January 2024. This was a saving of £450 for someone earning £35,000 a year. From April 2024, someone earning the UK average salary of £35,000 will now be £900 a year better off. Employees pay class 1 national insurance on earnings between £12,570 and £50,270. The maths for a 2% NI decrease on a £35,000 salary is: £35,000 – £12,570 = £22,430 x 2% = £448.60. The chart below illustrates the savings in NI for individuals at different salary levels from January and April 2024:

Savings in national insurance for self-employed people from April 2024

Changes to national insurance for self-employed individuals are twofold. Class 2 contributions will be abolished from April 2024 and class 4 contributions decrease from 9% to 6%. Class 2 contributions are currently £3.45 per week or £179.40 yearly. A self-employed individual earning £35,000 per year, will save £179.40 a year in class 2 contributions. The savings in class 4 contributions is £672 a year, with a total saving of £851.

Self-employed individuals earning less than £6,725 can continue to make voluntary national insurance contributions. This maintains their eligibility to certain state benefits. Voluntary contributions remain at £3.45 a week.

The chart below illustrates the savings in national insurance for self-employed people from April 2024, at various earnings levels:

The link below provides more guidance and information about the decreases to national insurance for employees and self-employed individuals:

Spring Budget 2024: Personal Tax Factsheet – GOV.UK (www.gov.uk)