National Insurance: What are the changes and how do they affect me? 

The Autumn Statement 2023, set out by Jeremy Hunt, brought about many changes, including changes to National Insurance and its policies. 

If you unsure of what National Insurance is, it is a policy that means you financially contribute to benefits and pensions set out by the Government in order to qualify for specific benefits and the State Pension too. 

Understanding the changes can significantly benefit you and make sure you are receiving exactly what you pay for. 

What are the changes? 

In the Autumn Statement 2023, three changes were made to National Insurance Contributions (NICs), with some applying from January 2024. 

NICs are usually an obligation but, with the changes from the Autumn Statement, they now become a tax-cut for employees and self-employed individuals. 

The changes are: 

1. A decrease from 12 per cent to 10 per cent on the main rate of employee Class 1 National Insurance from 6 January 2024 

2. A decrease from 9 per cent to 8 per cent on the main rate of the self-employed Class 4 National Insurance; this will take effect from 6 April 2024 

3. The self-employed will no longer pay flat rate NICs charge (Class 2 NICs); this is when someone’s annual profit exceeds the set threshold (currently £12,570). This will take effect from 6 April 2024 

These measures will extend and apply to the entirety of the UK, regardless of reason. 

How do they affect me? 

For you as a taxpayer, the change in National Insurance benefits rather than disadvantages you. 

Around 27 million employees and over two million self-employed people will benefit overall from the new changes. 

Let’s break down the benefits: 

1. The two per cent cut in the main rate of NICs for employees will benefit approximately 27.3 million people in 2024/25. For basic-rate taxpayers, the average annual gain will be £304, whilst the gain will be £647 for higher-rate taxpayers, and £707 for those who pay the additional rate 

2. The  one per cent cut in the main rate of NICs for the self-employed will benefit 2.1 million people in 2024/25. For the basic-rate taxpayer, you will gain annually an average of £117, whilst a higher-rate taxpayer will gain an average of £322, and an additional-rate taxpayer will gain an average of £358 

3. Removing the requirement for self-employed individuals to pay Class 2 NICs with profits lower than theirs will benefit approximately 1.9 million people in 2024/25 – per person, the average annual gain will be £186 

Remember: 

Although the percentage of the main rate of NICs paid, by both employees and self-employed individuals, has decreased, you still do not have the option to opt-out of the scheme or decide how much is paid into the pension itself. 

What to do next? 

Whilst we know the new changes to National Insurance are confusing and seem like they are a million miles away, it is important you understand the changes before they take effect so that you are making the most out of your contributions. 

You need to prepare for the changes when they take effect next year, with the earliest change starting from January 2024. If you need help regarding your pension and what to do, it is always best to consult an accountant for advice. 

If you are unsure about the recent changes, click on here for further information. 

For help and guidance surrounding National Insurance, get in touch with one our expert team members today.