Changes to Class 1 National insurance from 6 January 2024

As part of the Autumn Budget, presented in November, the Government announced changes to Class 1 National insurance for employees which will be implemented from 6 January 2024.

Jake Elms, Payroll Operations Manager, outlines these changes and what it means for your business.

The changes

Employees earning between £12,570 and £50,270 a year will have National Insurance contributions cut by 2% from 12% to 10%. Presently, this will remain at this rate for 2024-25 tax year.

Bandings will not be changing so this will affect employees earning above the primary threshold of £12,570. The National Insurance rate for those on higher earnings (those above £50,270 a year) will remain untouched.

This is a saving only for employees, as the employer rate and threshold remains the same (13.8% and £9,100 threshold).

The married women allowance (pre-1977) drops from 5.85% to 3.85% with National Insurance category B applied.

This is alongside other changes to NI including the abolition of Class 2 NI and reduction of Class 4 NI.

What does this change in National Insurance mean for you?

If you are one of the estimated 29 million individuals to benefit from the NI cuts (both employed and self-employed) this means you will keep more of your pay. A positive start to 2024! This will have a wider positive impact for households and families. Also, there will be implications relating to salary sacrifice with a reduction in rate, meaning a reduction in savings.

The changes to National Insurance will be brought in from the 6^th January 2024 as opposed to the usual tax year start in April. This means payroll will likely feel the burden given the short notice of these changes. For those employers who can’t amend their payroll system in time for the January change, they will be able to reimburse any overpayment of NICs to employees in subsequent months.

At Westcotts, our dedicated Payroll team understand the implications of these National Insurance changes and can offer you expert, personalised advice to help your business.

If you need a helping hand, you can contact Jake or the Payroll team by calling 01392 288555 or emailing payroll-managers@westcotts.uk.