Payroll – Reduction in National Insurance
Effective 6 April 2024, there will be reductions in National Insurance Contributions for both employees (Class 1) and the self-employed (Class 4). In addition, Class 2 National Insurance has been scrapped.
Class 4
National Insurance for the self-employed was already due to reduce from 9% to 8% on 6 April 2024. However, the reduction will now be from 8% to 6%.
Class 1
Employee National Insurance contributions were reduced in January 2024 by 2% from 12% to 10%. From 6 April, there will be an additional 2% reduction from 10% to 8%. This means employees will now see a deduction of National Insurance on monthly earnings of up to £4,189. The 2% deduction for income greater than the higher limit still remains.
Notably, there’s no alteration to the Employers’ National Insurance rate, which remains at 13.8% for monthly earnings exceeding £758.
While everybody welcomes tax cuts, it’s important to consider these cuts in the context of the current economic climate. While they should put more money in your pocket, with the previously announced cuts and freezing of tax thresholds they may not provide the benefits expected. Once you take into account the rate of inflation, any increase in the cash in your pocket, could be eroded.
Ensuring your payroll software is up to date is crucial for accurate National Insurance deductions. It’s recommended to verify with your payroll software provider or update your software promptly to guarantee accurate calculations.
For any inquiries regarding payroll matters, Parker & Co is readily available to assist.
For further information, please visit https://www.gov.uk/government/publications/changes-to-national-insurance-contributions-from-6-april-2024/reduction-to-the-main-rates-of-primary-class-1-and-class-4-national-insurance-contributions.