Search
  1. Home
  2. Personal Finance Hub
  3. What Do the National Insurance Changes Mean For Me?
Published 10 May 2024
Reading Time
7 minutes

What Do the National Insurance Changes Mean For Me?

In April 2024, National Insurance contributions for employees were reduced again, with cuts also made for self-employed workers. Find out how these changes apply to you and what difference it could make to your take-home pay.

The Chancellor, Jeremy Hunt, announced further National Insurance changes for employees and the self-employed in the Spring Budget on 6 March 2024.

The main National Insurance rate for employees is now 8% – it was reduced from 10% on 6 April 2024. It was previously reduced from 12% to 10% in January.

Self-employed Class 4 National Insurance contributions were also cut on 6 April, with the rate decreasing from 9% to 6%.

And self-employed Class 2 National Insurance contributions were scrapped entirely in April, a change that’s been in the pipeline since 2015.

Lower National Insurance contributions should mean you keep more of your earnings in 2024, however, it’s important to consider these cuts in the context of previously announced tax rises, ‘stealth’ taxes, and wage growth.

In particular, as wages go up but income tax thresholds remain frozen, more people will be pulled into paying tax for the first time or tipped into higher tax bands. This is known as ‘fiscal drag’.

Here, we explain the new National Insurance rates and how they might affect your pay packet. We also give general tips on budgeting and saving – and explore whether there’s anything you can do to combat tax rises and ‘stealth’ taxes.

» MORE: How National Insurance works

What are the new National Insurance rates?

The amount you pay in National Insurance is determined by whether you are employed or self-employed, and how much you earn. 

Employed

Currently, the National Insurance rate for most employees is 8% on income of £12,570 to £50,270 a year (£1,048 to £4,189 a month). This rate was reduced from 10% on 6 April 2024. 

The rate for any income over £50,270 a year (over £4,189 a month) is 2%.

You do not pay National Insurance on your first £12,570.

Annual incomeClass 1 NICs rate from 6 April 2024Rate of class 1 NICs from 6 January to 5 April 2024
£12,570-£50,2708%10%
Above £50,2702%2%

Self-employed

If you are self-employed, your National Insurance contributions are calculated using your annual profits.

Previously, you paid Class 2 National Insurance contributions at £3.45 a week if your self-employed profits were £12,570 or more. 

But from 6 April 2024, those with profits above £12,570 aren’t required to pay Class 2 National Insurance – and you still have access to contributory benefits such as the state pension. Those who make voluntary contributions can carry on doing so at £3.45 a week. For example, you might choose to make voluntary contributions to ensure you have enough qualifying years to claim the full state pension

When it comes to Class 4 National Insurance contributions, you pay 6% on earnings between £12,570 and £50,270 and 2% on profits above £50,270.

Annual profitsClass 4 NICs rate from 6 April 2024Previous rate of Class 4 NICs
£12,570 to £50,2706%9%
Above £50,2702%2%

Laura Suter, head of personal finance at investment platform AJ Bell, wrote to NerdWallet by email following the Autumn Statement in November 2023, saying: “The simplification of self-employed National Insurance helps to cut through some of the complexity of the tax system for those working for themselves. 

“The decision to abolish the Class 2 band of National Insurance will save a worker £179.40 a year at current rates, or £192.40 if you base it on what rates would have increased to next year,” she explained.

Why did the National Insurance contributions rate change?

With a general election on the horizon and the Conservatives lagging in the polls, Jeremy Hunt was widely expected to cut taxes further in the Spring Budget.

While there were rumours that the government would cut income tax, some commentators believe Hunt may have chosen to reduce National Insurance because it costs the Treasury less and benefits employees. This aligns with the Chancellor’s previously announced plans to incentivise people to work. 

How much National Insurance will I pay a year?

How much National Insurance you pay is tied to how much you earn. 

If you’re an employee, you can use the table below to give you an idea of how the recent National Insurance changes will affect your salary in 2024, at different wage brackets. The figures below show your annual National Insurance bill. 

Salary 2023 (12%)January-April 2024 (10%)From April 2024 (8%)Difference 2023-April 2024
£15,000 £291.60 £243.00 £194.40£97.20
£25,000 £1,491.60 £1,243.00 £994.40£497.20
£35,000 £2,691.60 £2,243.00 £1,794.40£897.20
£50,000 £4,491.60 £3,743.00 £2,994.40£1,497.20
£75,000 £5,018.60 £4,264.60 £3,510.60£1,508.00
£85,000 £5,218.60 £4,464.60 £3,710.60£1,508.00
£100,000 £5,518.60 £4,764.60 £4,010.60£1,508.00

    Source: AJ Bell. 

For self-employed workers, those on lower incomes will see a bigger reduction in National Insurance than employees earning the same amount from April 2024, when Class 2 National Insurance was scrapped and the Class 4 rate changed. 

For example, a self-employed person with £25,000 profits saves £552.30 a year from April, whereas an employee on a £25,000 salary saves £497.20 a year (compared with their 12% rate, applicable in 2023).

But higher-earning employees will end up with a bigger reduction than their self-employed counterparts. For instance, an employee earning £75,000 saves £1,508 a year from April, compared with the previous 12% rate, whereas a self-employed worker earning the same amount saves £1,310.40 a year from April.

Tax burden rising despite National Insurance cut

Investment platform interactive investor said in a press release that even with the National Insurance changes, both lower and higher earners are set to lose out because of the impact of fiscal drag.

In its analysis, it said that those earning £20,000 will pay £81 more tax in 2024-25, even with a £149 saving following the cut from 10% to 8%, because income tax thresholds aren’t rising with inflation. Those earning £100,000 will pay £1,064 more in the same tax year. This assumes an increase in tax thresholds in line with the OBR’s inflation forecast of 6.1% for 2023-24. 

Average earners are set to benefit according to interactive investor, however. Someone earning £30,000 should save £119 following the cut from 10% to 8% when taking the impact of fiscal drag into account, while those on £40,000 should save £319.

Finally, keep in mind that National Insurance cuts only benefit those in work, because it’s paid on earned income. For example, an income tax cut or change to the tax thresholds would have benefitted some pensioners too. But because tax thresholds remain frozen, more pensioners are being dragged into paying income tax.

How can you mitigate the impact of fiscal drag?

Sarah Coles, Head of Personal Finance at investment platform Hargreaves Lansdown, said in an email to NerdWallet after November 2023’s Autumn Statement that it’s essential to make the most of every possible tax break. “This includes tax efficient savings and investments like ISAs and pensions, which lifts the tax burden [from saving for your future].” 

Because personal allowances are frozen, and interest rates on cash savings accounts may be at their peak, more of us may be caught by having to pay tax on savings interest. That’s why it’s important to consider Individual Savings Accounts – or ISAs – as they give everybody a £20,000 tax-free savings allowance every tax year.

Paying into your pension will also usually attract some tax relief, helping you to reduce your tax burden and build your future pension pot.
Here are some tips to help you work out how much you can afford to save in your ISA or put into your pension in the new year:

1. Clear your ‘toxic debt’, such as payday loans or high interest credit cards.

2. Start an emergency fund that can cover unexpected expenses.

3. Contribute to your workplace pension scheme.

4. Continue to add to your emergency fund.

5. Pay off your remaining debts.

» MORE: Budgeting 101: how to make your money go further

Image source: Getty Images

Back To Top