National Insurance
The Chancellor confirmed a two percentage point cut to National Insurance (NI), which could impact up to 27 million British workers.
There were a number of leaks prior to the Budget announcement about potential announcements so it was no surprise to see this change introduced.
As things stand, those who are of a working age and receive income from a job or trade, pay both National Insurance Contributions (NICs) and income tax. However, those who obtain their income solely from other sources (e.g. pensions and rental) only pay income tax. Today’s budget announcement aims to shrink the disparity in tax treatment between workers and non-workers, by reducing the rate at which NICs are charged.
Employed Individuals
From 6 April 2024, the Government is cutting the main rate of employee NICs by 2p from 10% to 8%. This follows on from the Autumn statement 2023, where the Chancellor already introduced a 2p cut from 12% to 10%. These rates apply to employment income earned between £12,570 and £50,270, whilst the 2% rate charged on earnings in excess of £50,270 has been left unchanged.
This reduction is estimated to generate the average worker (on a salary of £35,400) a saving of £450 a year. When combined with the reduction introduced in the Autumn Statement 2023, the overall saving per year is over £900.
Self-Employed Individuals
Similar changes are being made for the self-employed, with the government cutting a further 2p from the main rate of self-employed NI from 6 April 2024, in addition to the 1p cut previously announced at Autumn Statement 2023.
For the average self-employed person on £28,000 a year, the NI cuts are expected to result in savings of £350 per year
Whilst these are welcomed changes to the British workforce, there has been no change in stance from the government in their approach to the thresholds at which Income Tax and National Insurance contributions come into effect. This means that the current threshold of £12,570 is expected to remain frozen until April 2028, rather than rising alongside the rate of inflation.
Given the way in which the announcement was made, one could reasonably expect the Conservative Party manifesto for the forthcoming election to include the idea or scrapping National Insurance over the next parliament.
If you have any questions for our Tax experts as a result of this Budget, please contact us on 01242 776000 or tax@randall-payne.co.uk.
