News

National Insurance (NIC) and National Minimum Wage

Employees Class 1 NIC

As was widely reported in the press beforehand, and following the 2% reduction already announced in the Autumn 2023 Statement (from 12% to 10% from 6 January 2024), employees will see a further 2% reduction in the main Class 1 NIC rate from 10% down to 8% from 6 April 2024.

Employees pay Class 1 NIC on their salaried earnings.

The rates in place prior to 5 April 2024 and the new rates in place afterwards are as follows:

This 2% reduction from 6 April 2024 onwards has been introduced to help lower earners keep more of their pay, but exactly what will it mean in terms of increased take home pay from 6 April 2024 onwards?

• On an annual salary of £22,300, (which would be the case for someone aged 21 and over working a 37.5 hour week on minimum wage) the reduction will equate to an increase in annual take home pay of £195.
• On an annual salary of £30,000, the reduction will equate to an increase in annual take home pay of £348.
• On an annual salary of £40,000, the reduction will equate to an increase in annual take home pay of £548.
• On an annual salary of £50,000, the reduction will equate to an increase in annual take home pay of £748.

Self Employed Class 4 NIC

The Chancellor also announced that Class 4 NIC, which is paid by those who are self employed at the current rate of 8% on business profits between £12,570 and £50,270, will be reducing down to 6% from 6 April 2024.

Making this change to the Class 4 rate means that those who are self employed will see a similar reduction in their tax bill compared to employees who are receiving a Class 1 NIC reduction.

Employers Class 1 NIC and Class 2 NIC for the self employed

No other announcements on the NIC front, so the following rates and allowances remain in place for the upcoming 2024/25 tax year:

• Employment Allowance, which reduces an employers NIC bill, will remain at £5,000 for the year.
• Employer Class 1 NIC rates and thresholds remain the same, meaning an employer will continue to pay Class 1 NIC at the rate of 13.8% on earnings which exceed £175 per week.
• Self employed people also fall within the Class 2 NIC regime.  Voluntary Class 2 NIC can be paid if profits are below £6,725.  Paying these contributions gives access to contributory benefits including the State Pension.  The weekly rate is £3.45.

Self employed individuals with profits exceeding £6,725 are no longer required to pay Class 2 NIC, this requirement being removed from 6 April 2024.  They will instead receive a NIC credit towards contributory benefits and the State Pension.

National Living and Minimum Wage

From 1 April 2024 both the National Living Wage (NLW) and the National Minimum Wage (NMW) rates will increase.  Please be aware that the NLW rate will be applicable from the age of 21 and not 23.  This is a legal right which covers workers above compulsory school leaving age.

The new hourly rates which must be paid for all employees are therefore as follows:

• employees aged 21 and over will increase to £11.44 (previously £10.18 for 21-22 year olds and £10.42 for 23 year olds and over)
• employees aged between 18-20 will increase from £7.49 to £8.60
• employees aged between 16-17 will increase from £5.28 to £6.40
• apprentices up to the age of 19, or in their first year of apprenticeship, will increase from £5.28 to £6.40 (unless rate specified in apprentice training contract)

If you have any questions on NIC or payroll matters, our specialists are on hand to help.  Give them a call on 01228 711888.