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- Introduction
- Personal Income Tax
- Employees
- National Insurance Contributions
- Savings and Pensions
- Capital Gains Tax
- Inheritance Tax
- Trusts & Estates
- Business Tax
- Corporation Tax
- Value Added Tax
- Other measures
- Income Tax Rates & Allowances
- National Insurance Contributions (Table D)
Budget sections
National Insurance Contributions (NIC)
Thresholds and rates (Table D)
In his 2022 Autumn Statement, the Chancellor announced that the thresholds for NIC would remain fixed until 2027/28. In the 2023 Autumn Statement he announced a reduction in the main rate of Employees’ Class 1 NIC from 12% to 10% to take effect from 6 January 2024; in the Spring Budget he has cut the rate further to 8% with effect from 6 April 2024.
In the Autumn Statement the Chancellor announced an intention to cut Class 4 NIC for the self-employed from 9% to 8% from 6 April 2024, but he has now taken this further and reduced the main rate to 6%.
These changes constitute a significant tax reduction for people in work, amounting to a maximum £1,508 for an employee earning above the Upper Earnings Limit, and a maximum of £1,131 for a self-employed person. These cuts offset the effective income tax increases arising from the freezing of personal allowances, and are targeted at people in work – an income tax cut would also benefit those who do not pay NIC on their income, such as landlords and pensioners.
The upper limits for employee and self-employed contributions remain aligned with the point at which 40% income tax is payable (£50,270 per year, or £967 per week), and are frozen at that level until the end of 2027/28.
Because the Scottish higher rate of income tax applies at a lower level than in the rest of the UK (above £31,092 of taxable income in excess of personal allowance rather than above £37,700), Scottish taxpayers can be liable to higher rate income tax and full primary NIC on the same income (42% plus 8% in 2024/25).
Class 2 NIC
Self-employed people have for many years had to pay flat rate Class 2 NIC, which have conferred entitlement to State pension, as well as profit-related Class 4 NIC. As announced in the Autumn Statement, from 6 April 2024, Class 2 NIC will not be required to secure benefits for anyone earning above £6,725, saving £179.40 a year for those earning over £12,570. Anyone earning less than that can still pay Class 2 voluntarily in order to maintain a full contribution record; the Spring Budget included an announcement that the Government will consult later this year on how to achieve abolition of Class 2 for those people as well.