Customisable business insurance
It’s the end of the month, and that can mean but one thing for many of us: payday. But this month’s payslip may look a little different because of a cut to National Insurance (NI) contributions. Read on to find out more.
What is National Insurance?
National Insurance has been around since 1911 and is a fundamental part of the UK’s welfare state.
It’s a tax paid by employees and the self-employed to fund and build entitlement to benefits such as Job Seekers Allowance, the State Pension and Maternity Allowance.
Payslip changes from January 2024
In November 2023, Chancellor Jeremy Hunt gave the Autumn Statement, the government’s plans for the UK economy.
In it — amongst other fiscal initiatives — he announced changes to the National Insurance that employees pay from January 2024.
How National Insurance is calculated for employees
If you are an employee you’ll pay Class 1 National Insurance. Contributions are calculated and taken automatically from your pay before it hits your account, along with your tax, pension and student loan if you pay this.
As of 6 January 2024, the rate of Class 1 NI contributions was cut from 12% to 10% for those earning between £242 and £967 a week (£12,570 and £50,270 a year).
Around 27 million people across the UK will see a change in their payslips this month, with the maximum gross saving of £754 a year. Based on the average salary of £35,400 a year, after tax employees will be pocketing an extra £450 annually as a result of the change.
Well, that’s something to wipe away those January blues.
What about the self-employed?
If you’re self-employed, you’ll likely be focussing on your Self-Assessment tax return as the deadline of 31 January is fast approaching.
If you’re self-employed you will pay Class 2 and/or Class 4 National Insurance, depending on your profits.
As of April 2024, Class 2 contributions are being axed, affecting an estimated two million people and saving the average self-employed person £192 a year.
Class 4 National Insurance — charged on self-employed earnings between £12,570 and £50,270 — will also be cut by 1% to 8% from April.
Learn more in our guide to National Insurance contributions for the self-employed.
What do I need to do as an employer?
If you’re an employer, your payroll provider should have already made this change automatically. If they haven’t, you can reimburse your employees at the next payroll or over the coming months.
You can communicate any changes your employees may see in their monthly salary through their payslips, and via a company-wide communication. This should ease the burden on your finance or HR teams having to field queries on the same topic.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
We've made buying insurance simple. Get started.
- 30 January 20244 minute read
Unsure how to negotiate insurance limits when you’re speaking with enterprise clients? Read on to learn how.