22 November 2023 , 13:25
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Jeremy Hunt today announced a much-anticipated National Insurance cut as part of his Autumn Statement.
The Chancellor confirmed the main rate of National Insurance will fall from 12% to 10% from January 6 next year, in a move he said will benefit around 27 million employees. The average worker on a £35,400 salary will save £450 over the 2024/25 tax year, he announced today.
However, the threshold for when you start paying National Insurance remains frozen until April 2028. This means more people still risk being dragged into paying tax for the first time when they get a pay rise.
Mr Hunt said: "I would normally bring in a measure like this for the start of the new tax year in April, but instead, tomorrow I’m introducing urgent legislation to bring it in from 6 January, so that people can see the benefit in their payslips at the start of the new year."
National Insurance is a tax on your earnings, which you start to pay when you earn above a certain threshold. Your contributions count toward your entitlement to benefits and the state pension in later life - and you stop paying National Insurance once you reach state pension age.
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Use our National Insurance calculator below to see how the changes to Class 1 contributions affect you. Please note: This does not work with Class 2 and Class 4 contributions for the self-employed.
If you're an employee, you currently pay 12% of your income in Class 1 National Insurance contributions on earnings above £12,570 - but this will reduce to 10% from next year. You pay 2% on earnings over £50,270 - this figure will remain the same next year. The threshold for when you start to pay National Insurance - currently set at £12,570 - almost remains frozen.
If you are self-employed, you normally pay Class 2 or Class 4 contributions - but in his speech today, the Chancellor announced he will abolish Class 2 contributions from April 2024. Class 2 contributions are currently set at a fixed weekly rate of £3.45 and are paid if your profits are more than £12,570 a year.
Class 4 contributions are currently charged at 9% on profits between £12,570 and £50,270 - but this will be reduced to 8% from April 2024. You pay 2% on profits over £50,270. The Chancellor says changes to both Class 2 and Class 4 contributions will save two million self-employed people around £350 a year.