Decreases in national insurance for self-employed individuals
The Chancellor announced in the Spring budget decreases to self-employed national insurance rates. The decreases in national insurance for self-employed individuals come into effect from April 2024. Class 4 national insurance contributions will decrease by 3%, from 9% to 6%.
From April 2024, class 4 national insurance contributions will be 6% and class 2 contributions are no longer payable. Class 2 contributions are currently £3.45 a week which will be an annual saving of £179.40. A self-employed individual with a net income of £40,000 a year will pay £823 less in Class 4 contributions. Including the savings from the abolished class 2 contributions, they will save £1,002 in national insurance for the year.
Voluntary class 2 national insurance contributions
Self-employed individuals earning less than £6,725 can make voluntary class 2 national contributions to maintain their eligibility for certain state benefits. Voluntary class 2 contributions will remain at £3.45 a week.
The illustrations below highlight the savings for self-employed individuals at different income levels from April 2024:
| Annual Income | Saving in NI |
|---|---|
| £30,000 | £702 |
| £35,000 | £852 |
| £40,000 | £1002 |
| £45,000 | £1152 |
| £50,000 | £1302 |
Class 2 national insurance contributions on income over the threshold of £50,270 remain at 2%. The new rate of 6% is payable on income over £12,570 and up to £50,270.
National insurance reduction for company directors
There is also a national insurance reduction for company directors who pay themselves a salary via payroll. The Chancellor announced a 2% reduction on employee national insurance contributions from 10% to 8%. Directors who pay themselves a salary will pay 8% national insurance contributions on their salary between £12,570 and £50,270 from 6th April 2024.
The HMRC link below provides more information about the decreases in national insurance:
Spring Budget 2024: Personal Tax Factsheet – GOV.UK (www.gov.uk)
For more information on tax and national insurance for self-employed individuals and company directors follow the link below: