5th February 2024
National insurance contributions (NICS)
SIGNIFICANT REFORMS AND RATES CUT FOR MILLIONS OF WORKERS
National Insurance is a cornerstone of the welfare and benefits system. As a citizen, your contributions will likely play a significant role in funding state provisions such as pensions, maternity leave and bereavement support. If you’re over 16, under the State Pension age and either employed or self-employed, chances are you’re making National Insurance Contributions (NICs).
The amount of NICs you’re required to pay is contingent upon your earnings and employment status. In other words, your contribution is calculated based on how much you earn and whether you’re an employee or run your own business. This system ensures that everyone contributes fairly to the welfare system based on their financial capabilities.
National Insurance rates are segmented into ‘classes’, each corresponding to a specific earnings range and employment status. Typically, employees fall under Class 1, while self-employed individuals are categorized as Class 4. This classification helps streamline the process and accurately calculates each individual’s contributions.
Once you’ve reached the State Pension age, your obligation to contribute to the National Insurance pool ceases. This means you can enjoy your retirement without worrying about further deductions from your income for National Insurance.
AUTUMN STATEMENT 2023
In the Autumn Statement 2023 last November, Chancellor Jeremy Hunt announced significant reforms to National Insurance. This is the third change to National Insurance since 2022.
But despite these cuts, the tax burden is still expected to remain at a record high. Mr Hunt cut the main rate of Class 1 employee N Cs from 12% to 10%. This took effect on 6 January 2024. There will also be a cut in the main rate of Class 4 self-employed NICs from 9% to 8%. This will take effect from 6 April 2024. From 6 April 2024, Mr Hunt said no one will be required to pay Class 2 self-employed NICs.
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THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.