National Insurance changes for 2024

Significant changes to National Insurance Contributions (NICs) have been announced in the Autumn Statement to take effect in 2024.

• Download our full summary (pdf)
• Download 2024/25 Tax Tables (pdf)

The changes will affect both the employed and the self-employed.

• Abolition of Class 2 NICs
• Reducing the rate of Class 4 NICs
• Cutting the rate of employee Class 1 NICs

Whilst the changes to Class 2 and 4 NICs relating to the self employed will take effect from 6 April 2024, the changes to Class 1 NICs for employees take effect from 6 January 2024.

What was not mentioned in the Autumn Statement was the effect of fiscal drag, that is the effect of not increasing tax and NIC thresholds by the rate of inflation, so more income is in fact taxed than would otherwise be the case.

Key National Insurance Rates and Thresholds from 6 April 2024

(HMRC NIC rates and allowances 6 Jan 2024)

Employee NICs

• The main rate of Employee National Insurance (Class 1 NICs) will be cut by 2p from 12% to 10%, from 6 January 2024.  For those employers who can't amend their payroll system in time for the January change, they will be able to reimburse any overpayment of NICs to employees in subsequent months

• Directors/employees may wish to defer their Christmas bonuses (where appropriate) in order to have it paid after 6 January 2024 and save NICs. (NOTE: There are special rules for directors)

• Directors who have left within the 2023/24 tax year will need their NICs recalculated to take the blended rate of class 1 NICs into consideration. Directors who remain in employment and have their NICs calculated using the alternative method, will need to be changed to the cumulative calculation in their final pay period of the tax year, to ensure their NICs are calculated using the blended rate.


• This will reduce the current 32% combined tax rate for employees (income tax + national insurance) paying the basic rate of tax to 30%.


• While the 12% NIC rate for earnings up to £50,270 is reducing, the 2% rate on higher earnings is untouched.


• Employers can add a message to January payslips to ensure employees are aware of why they will have seen a reduction in the amount of NICs on their payslip.

Self Employed NICs

• The main rate of Self-employed National Insurance (Class 4 NICs) is cut by 1p from 9% to 8% from April 2024.  This takes effect on 6 April 2024.
• From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits including the State Pension.
• Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently.
• Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so. The weekly rate they pay will be frozen at £3.45 for 2024-25, rather than rising by CPI to £3.70.
• The Small Profits Threshold  - the point at which the self-employed start to receive National Insurance credits - has been frozen at £6,725, in line with last year’s approach. This supports low income working individuals by maintaining their access to contributory benefits, without having to pay NICs.

Other Changes

Veterans

Relief granted to employers of eligible veterans is extended for a further year to March 2025, so employers will not pay employer NICs on earnings up to £50,270 for the first year a veteran is employed in a civilian role.  

Investment zone employers 

Investment zones in England will be extended from a period of five years to ten years.

It is possible to apply a zero-secondary rate of employer NICs for such employees’ earnings above the secondary threshold (£9,100 per annum) up to and including an upper secondary threshold (£25,000 per annum) equivalent to the freeport upper secondary threshold, where the conditions to claim the relief are met.

The balance of earnings above this upper secondary threshold will be charged at 13.8%. However, the calculation of primary class 1 NICs is unaffected. 

Freeport employers 

Freeport tax reliefs are now available up to September 2031 in England.

This provides employers with premises in a freeport with a zero rate of secondary class 1 NICs on the earnings of new employees, who spend 60% or more of their working time within freeport tax site. This rate can be applied on the earnings of all new hires up to £25,000 per annum from April 2022 for 36 months per employee.

Grossing up

HMRC has updated its guidance on how to gross up pay from net pay to take account of the 6 January 2024 change in employee Class 1 NICs. See HMRC manual page PAYE 72028.

National Insurance Bill / Act

The changes to National Insurance, which will take effect on 6 January 2024 for employees and 6 April for self-employed people, are being legislated through The National Insurance Contributions (Reduction in Rates) Bill.

The Bill received Royal Assent on 18 December 2023

HMRC National Insurance Manual

HMRC has updated its manual for Class 1 NIC changes taking effect from 6 January 2024.

• National Insurance Manual 01625
• National Insurance Manual 01279A

There are other minor changes throughout the manual reflecting the change.

Paying National Insurance if you're working in the EU etc.

HMRC has updated its guidance for those who pay social security contributions in the EU, Gibraltar, Iceland, Liechtenstein, Norway, or Switzerland.

Further information

For more information, check out our Employer Solutions Hub.