Autumn Statement 2023: National Insurance Factsheet

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Nov 25

A factsheet setting out details of cuts to main rates of National Insurance for employees and the self-employed.

HM Treasury have issued a factsheet outlining more information on the National Insurances changes announced at the Autumn Statement on Wednesday 22nd November 2023.

They have issued the following which is also available by clicking on the image above.

***** Information begins *****

As part of our long-term plan to grow the economy, we are cutting the main rates of National Insurance for employees and the self-employed, and simplifying the tax system by abolishing Class 2 NICs.
Together, this is a tax cut for 29 million working people worth £9 billion per year.
In 2024-25, this is a tax cut worth £450 for the average employee on £35,400 and means they will pay over 15% less NICs.
Today's changes mean that for those on average salaries, personal taxes would be lower in the UK than every other G7 country, based on the most recent OECD data.

0.1 Cutting National Insurance for employees

We are incentivising work and making sure it pays by cutting the main rate of Employee National Insurance (Class 1 NICs) by 2p from 12% to 10%, from 6 January 2024, for 27 million workers.
This action will reward work by reducing the current 32% combined tax rate for employees (income tax + national insurance) paying the basic rate of tax to 30% - the lowest since the 1980s.
Thanks to today's NICs cut and to above-inflation increases to personal tax thresholds since 2010, an average worker in 2024-25 will pay over £1,000 less in personal taxes than they otherwise would have done.
From April 2024, a full time National Living Wage worker's take home pay will be 30% greater in real terms than it was in 2010, due to successive increases in the National Living Wage and changes to personal tax rates and thresholds.

0.2 Who does this help?^{[footnote 1]}

A senior nurse with 5 years of experience on £42,618 will receive an annual gain of £600.^{[footnote 2]}
An average full-time nurse on £38,900 will receive an annual gain of over £520.^{[footnote 3]}
An average police officer on £44,300 will receive an annual gain of over £630.^{[footnote 4]}
A typical junior doctor on £63,000 will receive an annual gain of over £750.^{[footnote 5]}
A cleaner working night shifts on £21,000 will receive a gain of £170.^{[footnote 6]}
A typical self-employed plumber on £34,400 will receive an annual gain of £410.^{[footnote 7]}
An average teacher on £44,300 will receive an annual gain of over £630.^{[footnote 8]}
A hard-working family with 2 earners on the average earnings of £35,404 will be £900 better off.

0.3 Cutting National Insurance for the self-employed

We are cutting the main rate of Self-employed National Insurance (Class 4 NICs) by 1p from 9% to 8% from April 2024, for around 2 million people. This takes effect on 6 April 2024.
This is worth £350 for the average self-employed person on £28,200.
From 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs, but will continue to receive access to contributory benefits including the State Pension.
This is a tax simplification that effectively abolishes Class 2 NICs by removing the requirement for self-employed people to pay.
Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs, as they do currently.
Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so. The weekly rate they pay will be frozen at £3.45 for 2024-25, rather than rising by CPI to £3.70.
The Small Profits Threshold - the point at which the self-employed start to receive National Insurance credits - has been frozen at £6,725, in line with last year's approach. This supports low income working individuals by maintaining their access to contributory benefits, without having to pay NICs.

0.4 Further background on the 2p cut to employee NICs

The main rate of Employee NICs will be 10% from 6 January 2024.
Employees will benefit from January, as their employers make changes to their payroll system.
There may be a minority of employers who do not amend their payroll system in time for employees to see the benefit in their January payslip. Employers will rectify this in subsequent months and employees will receive the full value of the NICs cut.
The Lower Earnings Limit – the point at which employees start to receive NI credits - has been frozen at £6,396, in line with last year's approach. This supports low income working individuals by maintaining their access to NICs credits, without having to pay NICs.
Individuals will continue to be able to pay voluntary Class 3 NICs to help fill gaps in their National Insurance record to qualify for the State pension, exactly as before. The Class 3 rate will also be frozen at £17.45 per week for 2024-25.

0.5 Key National Insurance Rates and Thresholds from 6 April 2024

All case studies for 2024-25
Based on a Band 6 nurse with 5 years experience (source).
Median gross annual pay for a full-time nurse, Annual Survey of Hours and Earnings 2023
Median gross annual pay, Sergeant and below, Annual Survey of Hours and Earnings 2023
Mean Annual Earnings including additional activity for a Speciality Registrar (source)
Based on median gross annual pay of £21,058 (mean is £21,560) for full-time cleaners ("Elementary Cleaning Occupations: Cleaner and domestics") in ASHE 2023
Median gross annual pay for "Plumbers & heating and ventilating installers and repairers" was £34,361 in ASHE 2023. The calculation assumes self-employed profits equal to £34,361 (a C4 gain of £218) plus a C2 gain of £192.
Median earnings, School Workforce 2022 plus announced 6.5% pay increase

***** Information ends *****

Autumn Statement 2023: National Insurance Factsheet

PAYadvice.UK 25/11/2023