Do the National Insurance contribution changes apply to me?

The headline news from the Chancellor’s Autumn Statement was the changes to National Insurance contributions (NIC) for the self-employed and employees, with a reduction of primary Class 1 and Class 4 NIC and the removal of compulsory Class 2 NIC.

Class 1 NIC changes

The main rate of primary Class 1 NIC paid by employees on earnings between £12,570 and £50,270 per year will be reduced from 12% to 10%.

This change will be effective from 6th January 2024, so you will need to update your payroll software before the January pay run to ensure the correct rate of Class 1 NIC is deducted from employees.

Class 4 NIC changes and compulsory Class 2 NIC removal

For self-employed taxpayers the main rate of Class 4 NIC will be reduced by 1% from 9% to 8% from 6th April 2024.

On top of to this, the self-employed with profits above £12,570 will no longer pay Class 2 NIC but will continue to receive access to contributory benefits, including the state pension.

Those with profits between £6,725 and £12,570 will continue on this basis.

Those with profits under £6,725 who choose to pay Class 2 NIC voluntarily to protect their entitlement to contributory benefits including the state pension will still be able to do so.

According to the Chancellor these NIC reductions will amount to a saving of £350 per year for the average self-employed taxpayer and £450 for the average employee.

If you’re unsure on whether these changes affect you, or if you need some advice on your NIC, please get in touch with our experts.