Articles
The Chancellor announced a cut in the main rate of Class 1 Employee’s National Insurance from 10% to 8% and in Class 4 NIC for self-employed workers from 8% to 6%
As many had anticipated in the run-up to Budget Day, the Chancellor announced a cut in the main rate of Class 1 Employee’s National Insurance from 10% to 8%. This follows a reduction from 12% to 10% which was effective from 1 January 2024.
The change takes effects from 6 April 2024 and as a result around 27 million employees will see an increase in their net pay paid in April.
The main rate of Employee’s NIC for monthly paid employees covers the monthly gross earnings in the 2024/25 tax year from £1048 to £4189 (the Upper Earnings Limit),
These thresholds are not changing in April, in the same way as the tax allowances and thresholds which are currently frozen, which does mean that some lower earners will be brought into PAYE and NIC if pay increases bring their earnings over £12570 for 2024/25.
For each £100 a person earns over £1048 per month they will receive £2 extra in their net pay from April 2024.
Here are some practical examples of what this will mean to your net pay (assuming other factors being unchanged)
| Gross pay | NI reduction calculation | NI saving (net) per month |
| £2048 | £1000×2% | £20 |
| £2548 | £1500×2% | £30 |
| £3048 | £2000×2% | £40 |
| £3548 | £2500×2% | £50 |
This continues up to a maximum reduction at gross pay £4189 the reduction is £3141×2% which results in £62.82 extra net.
Employees who paid in excess of £4189 are subject to the Upper Earnings Limit and so will receive a capped amount of £62.82 extra net from April 2024.
Self-Employed Class 4 NIC
In much the same way The Chancellor announced a cut in Class 4 NIC for self-employed workers. This rate has been cut also by 2% from 8% to 6%.
This cut will give the same level of savings £10 less NIC monthly for each £500 of monthly income (£100 saving for each £5,000 annually falling in to Class 4 net).
As the Lower Profits Threshold (£12570) and Upper Profits Limit (£50,270) annually are at the same levels as for Class 1 NIC the savings on Class 4 NIC will be exactly as in the table above.
AUTHOR
Manager, Payroll
More & Other Musings
View all related contentArticles3 Jul 2024
HMRC have announced that reporting and paying income tax and Class 1A National Insurance Contributions (NIC) on benefits in kind through payroll will become mandatory from April 2026. All employers will be required to process taxable benefits through the payroll... Read more
Articles8 Feb 2024
When expanding up into the UK, outsourcing your payroll can be a very effective cost and time saving solution
Articles8 Feb 2024
It can be difficult looking for an outsourced payroll provider, here's a guide to some of the key questions to ask.
Articles15 Jan 2024
In the Autumn Statement the main rate of Class 1 Employee’s National Insurance was cut from 12% to 10%. What will this mean for you?
Articles21 Dec 2023
The DWP has been considering how to extend auto enrolment to a wider range of workers. The introduction of regulations could facilitate changes to expand the criteria of eligibility for auto enrolment.