The Chancellor announced major changes to the National Insurance contributions (NICs) system.
Employees and NICs
The government will cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024 so that employees can benefit as soon as possible.
The self-employed and NICs
The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.
Firstly, the government will abolish Class 2 self-employed NICs from 6 April 2024. This means that, 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.
- 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 government will set out the next steps on Class 2 reform next year.
Secondly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024.
Extension of NICs relief for hiring veterans
The government is extending the employer NICs relief for businesses hiring qualifying veterans for a further year from April 2024 until April 2025. This means that employers will continue to pay no employer NICs up to annual earnings of £50,270 for the first year of a qualifying veteran’s employment in a civilian role.