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2p cut in National Insurance Contributions

Latest News

12 March 2024

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Nadia Khan

Independent financial adviser, Nadia Khan, explains the NI contribution change announced in the Spring Budget 2024.

Chancellor Jeremy Hunt confirmed a cut in National Insurance Contributions (NICs) in the Spring Budget. The cut, widely trailed in advance of the Budget and applying from 6 April, will cost the Treasury approximately £10 billion a year.

Mr Hunt said this was a further cut worth over £10 billion a year for workers, following the government NICs cut for 29 million workers in the Autumn Statement 2023.

The government is cutting the main rate of employee Class 1 NICs by 2p from 10% to 8% from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, the Chancellor said this will save the average worker on £35,400 over £900 a year.

The government is also cutting a further 2p from the main rate of self-employed Class 4 NICs on top of the 1p cut announced at Autumn Statement 2023. This means that from 6 April 2024, the main rate for the self-employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, the Chancellor announced that this will save an average self-employed person on £28,000 around £650 a year.

The Chancellor commented that the combined effects of these reductions to NICs also mean that a person on the average wage now has the lowest effective personal tax rate since 1975.

The Office for Budget Responsibility (OBR) forecasts that, as a result of the reductions to NICs at the Spring Budget, total hours worked will increase by the equivalent of almost 100,000 full-time workers by 2028/29. Combined with the impact of the NICs cuts announced at the Autumn Statement 2023, the OBR expects that total hours worked will increase by the equivalent of around 200,000 full-time workers by 2028/29.

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THIS ARTICLE REPRESENTS THE VIEWS OF THE ADVISER AND DOES NOT CONSTITUTE AS FINANCIAL ADVICE.

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