Autumn Statement 2023: National Insurance rates to be cut for millions of workers
Workers will be able to keep more of their income next year after the Chancellor announced major reforms to National Insurance.
The National Insurance Class 1 rate that millions of workers pay will fall from 12% to 10% from 6 January 2024. Meanwhile, self-employed workers will also see a boost from April 2024 with Class 2 National Insurance payments abolished, and the rate on Class 4 National Insurance will be cut from 9% to 8%.
This will be the third change to National Insurance since 2022 and comes after Mr Hunt faced pressure to make tax cuts following inflation falling to 4.6%.
Here, Which? explains how the changes will affect the amount of National Insurance you'll pay from 2024.
- Find out more:Autumn Statement 2023: what it means for your money
Who pays National Insurance?
Your National Insurance contributions depend on your employment status and how much you earn. Not everybody has to pay National Insurance, but contributions count towards your state pension and other benefits.
If you have an employer, you'll pay Class 1 National Insurance contributions.
If you're self-employed, you could currently pay Class 2 and Class 4 National Insurance.
- Find out more: what is National Insurance?
Class 1 National Insurance rates cut
Class 1 National Insurance is currently charged at 12% on earnings between £12,570 and £50,270 and 2% on profits above this.
Today it was announced the rate will be cut by two percentage points to 10%. This will apply between the primary threshold and the upper earnings limit.
Hunt said the Government would introduce 'emergency legislation' to bring these cuts forward to 6 January 2024.
| How much you earn | Current NI rates | NIC from 6 January 2024 |
|---|---|---|
| Under £12,570 | 0% | 0% |
| £12,570-£50,270 | 12% | 10% |
| Over £50,270 | 2% | 2% |
- Find out more: National Insurance rates
How much will you save?
Hunt said the average worker on a salary of £35,000 a year would save an extra £450 per year.
Investment platform AJ Bell has crunched the numbers to find out what the cut means across a range of other salaries.
| Annual salary | Current total NI Cost | NI cost from January 2024 | How much will you save? |
|---|---|---|---|
| £20,000 | £891.60 | £743.00 | £148.60 |
| £30,000 | £2,091.60 | £1,743.00 | £348.60 |
| £40,000 | £3,291.60 | £2,743.00 | £548.60 |
| £50,000 | £4,491.60 | £3,743.00 | £748.60 |
| £60,000 | £4,718.60 | £3,964.60 | £754.00 |
| £70,000 | £4,918.60 | £4,164.60 | £754.00 |
| £80,000 | £5,118.60 | £4,364.60 | £754.00 |
Source: AJ Bell
Self-employed National Insurance changes
If you're self-employed, you'll need to make National Insurance contributions on your profits when you earn above a certain amount. Two major changes were announced by Hunt.
Class 2 NICs abolished
Hunt said he would abolish the 'outdated and needlessly complex' Class 2 self-employed National Insurance Contributions (NICs) from April 2024.
If your earnings exceed £12,570, you currently pay a flat rate of £3.45 a week, which comes to £179.40 for the year. These would have risen to £3.70 from 6 April 2024.
However, these have now been scrapped and self-employed workers will continue to access contributory benefits, including the state pension.
Those earning between £6,725 and £12,570 don't need to pay Class 2 contributions.
However, Hunt said those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits will continue to be able to do so. The rate for these will remain at £3.45 in the 2024-25 tax year.
- Find out more: how to file a self-employed tax return and VAT return
Class 4 rate cut
Class 4 contributions will be cut by one percentage point from 9% to 8% on profits between £12,570 and £50,270.
The higher rate of 2% on profits over £50,270 will remain the same.
| Profits | Class 4 rates 2023-24 | Class 4 rates 2024-25 |
|---|---|---|
| Under £12,570 | 0% | 0% |
| £12570-£50,270 | 9% | 8% |
| Over £50,270 | 2% | 2% |
How much will self-employed workers save?
Hunt said around 2 million self-employed workers would benefit, with the average worker earning £28,200 saving £350 in the 2024-25 tax year.
A self-employed worker who pays Class 2 NICs every week will save at least £192 per year.
| Salary | Current Class 2 and Class 4 cost | Class 2 and Class 4 costs from April 2024 | How much will you save? |
|---|---|---|---|
| £20,000 | £848.10 | £594.40 | £253.70 |
| £30,000 | £1,748.10 | £1,394.40 | £353.70 |
| £40,000 | £2,648.10 | £2,194.40 | £453.70 |
| £50,000 | £3,548.10 | £2,994.40 | £553.70 |
| £60,000 | £3,767.00 | £3,210.60 | £556.40 |
| £70,000 | £3,967.00 | £3,410.60 | £556.40 |
| £80,000 | £4,167.00 | £3,610.60 | £556.40 |
Source: AJ Bell
How much National Insurance will you pay this year?
Use our calculator below to see how much National Insurance you'll pay this year; you can also select other tax years from the dropdown menu.
