National Insurance rates to be cut again from April - how much will you save?
Millions of workers will be able to keep more of their income in the new tax year after the Chancellor announced in his Spring Budget that he will be cutting National Insurance rates again from April.
The National Insurance Class 1 rate, was previously cut by two percentage points in the Autumn Statement, falling from 12% to 10% in January 2024. Now it will be reduced to 8% from 6 April 2024 when the new tax year begins.
Self-employed workers will also benefit from further tax cuts. In the Autumn Statement Class 2 rates were abolished and the Chancellor announced a plan to cut Class 4 rates from 9% to 8% from April 2024. In today's speech, the Chancellor announced self-employed workers would also get a 2p cut and pay 6% from April 2024.
Here, Which? explains how the changes will affect the amount of National Insurance you'll pay from the 2024-2025 tax year.
- Find out more: Spring Budget 2024: what it means for your money
Who pays National Insurance?
Your National Insurance contributions (NICs) 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: National Insurance rates and contributions explained
Class 1 National Insurance rates cut
Class 1 National Insurance is currently charged at 10% on earnings over £12,570 after it was cut from 12% in the Autumn Statement 2023. You pay 2% on profits above £50,270.
Today it was announced the rate will be cut by another two percentage points to 8%, on earnings over £12,570.
Hunt said the Government would introduce emergency legislation to bring these cuts forward to the new tax year - which begins on 6 April 2024.
| How much you earn | Current NIC rates | NIC from 6 April 2024 |
|---|---|---|
| Under £12,570 | 0% | 0% |
| Between £12,570 and £50,270 | 10% | 8% |
| Over £50,270 | 2% | 2% |
- Find out more: use our updated National Insurance tax calculator to see how the change will impact your money
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. He said when combined with the Autumn Statement reductions, it would save 27 million employees an average of £900 in the 2024-25 tax year.
We've crunched the numbers to find out what the cut means across a range of other salaries.
| Annual salary | 2023-24 NI costs | 2024-25 NI costs | Amount saved |
|---|---|---|---|
| £25,000 | £1,429.45 | £994.40 | £435.05 |
| £35,000 | £2,579.45 | £1,794.40 | £785.05 |
| £50,000 | £4,304.45 | £2,994.40 | £1,310.05 |
| £75,000 | £4,830.10 | £3,510.60 | £1319.50 |
| £85,000 | £5,030.10 | £3,710.60 | £1,319.50 |
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.
In the Autumn Statement Hunt abolished Class 2 NICs, with the changes due to come in from the new tax. These were previously paid on profits which exceeded £12,570. He also announced the Class 4 rate would fall from 9% to 8%.
Today, Hunt revealed that Class 4 rates would fall further than planned, and instead of 8%, this group would pay 6% on profits between £12,570 and £50,270 from 6 April 2024.
The higher rate of 2% on profits over £50,270 will remain the same.
| Profits | Class 4 rates 2023-2024 | Class 4 rates 2024-25 |
|---|---|---|
| Under £12,570 | 0% | 0% |
| Between £12,570-£50,270 | 9% | 6% |
| Over £50,270 | 2% | 2% |
- Find out more: self employed National Insurance rates
How much will self-employed workers save?
Hunt said the changes announced today would save the average self-employed worker £350 per year.
He said when combined with the Autumn Statement reductions, 2 million self-employed workers will see a tax cut of £650 in the 2024-25 tax year. A decent chunk of this saving will come from the abolition of Class 2.
| Profits | 2023-24 NI costs * | 2024-25 NI costs | Amount saved |
|---|---|---|---|
| £25,000 | £1,298.10 | £745.80 | £552.30 |
| £35,000 | £2,198.10 | £1,345.80 | £852.30 |
| £50,000 | £3,548.10 | £2,245.80 | £1,302.30 |
| £75,000 | £4,067 | £2,756.60 | £1,310.40 |
* Includes Class 2 rates which will be abolished from 6 April
How much National Insurance will you pay this year?
If you want to find out how much tax you'll need to pay in the 2024-25 tax year we're here to help. You can use our National Insurance tax calculator to find out.
