National insurance cut for employees and self-employed – Budget 2024

On Wednesday 6 March the Chancellor, Jeremy Hunt, presented his Budget for the coming year. The result of which will produce a much-needed national insurance income boost for 29 million working people. However, it is the country’s employers who have been left out of the savings. 

The Chancellor used a lot of catchy phrases about “levelling up”, “turning a corner”, “increasing productivity” and being “on track to deliver” throughout his speech. In respect of the tax system, he consistently referenced making tax regimes “fairer” and “less confusing”, and “making work pay”. The main result of this was a cut to the base rate of national insurance.

National insurance for employees 

The Government has today announced it will be further cutting the main rate of Class 1 employee national insurance contributions (NIC) from 10% to 8%. This is a significant reduction, having already been reduced from 12% to 10% from January following the last Autumn Statement.

This will provide an increase in take-home pay for c.27 million working people, with the Government estimating that a worker on the average salary of £35,400 would receive an additional £450 in 2024/25, on top of the estimated £450 saving mooted from the Autumn Statement announcement. A worker on £50,000 or more per annum is expected to save £750 a year as a result of this change.

The cut is welcome but the fiscal drag effect of frozen personal tax allowances and no changes to the NIC thresholds means some of the savings may quickly disappear.

Where are the employer savings? 

From a purely payroll/employment tax outlook, employers have once again been left out of the savings. It was a bit surprising to hear that there was no equivalent employer’s NIC reduction, especially in light of the upcoming national living wage (NLW) increase, however this is in line with the Autumn Statement.

For employers who have staff paid at the NLW, from 6 April it will not only cost an additional £1.02 per hour per employee, but there is the additional whammy of 13.8% employer’s NIC on top of that. Some employers are likely to be significantly affected by these changes.

For employers with staff paid well in excess of the NLW, it will be ‘as you were’, with no additional payments to make, but no savings either. Given the economic upheaval of the last few years, a tax-neutral outcome from the Budget is not the worst thing in the world.

Where are the savings for self-employed workers?

In the Autumn Statement, a reduction in the main rate of Class 4 self-employed NICs, from 9% to 8% from April 2024, and the abolition of Class 2 NICs was announced. In line with the 2% cut to the employee NI rate, self-employed workers’ national insurance rate is also being reduced by a further 2%, effectively going down from 9% to 6% from April. This will save £650 for the average self-employed person earning £28,000.

High income child benefit charge

Child benefit is paid to most households with children – it is currently worth £24 a week for one child and £15.90 for each additional child. Currently, any claimants who earn more than £50,000 lose some of their family’s child benefit. However, a family where two parents jointly earn more than £50,000 receives the full amount. So if two parents earn £49,000 each, they still get full child benefit, but if one earns £60,000 and the other isn’t working (or they are a single parent) they don’t get any child benefit.

That £50,000 figure has not changed since it was introduced in 2013, which means that the policy is affecting many more people than it did originally. If it had increased in line with rising prices, the point at which people start losing child benefit would be almost £68,000.

The Chancellor today said the current system is “confusing and unfair”. Today’s Budget announcement confirmed a consultation on introducing a household income based system from April 2026. There will be an immediate increase to the income threshold at which claimants will lose some of their child benefit, from £50,000 to £60,000, taking 170,000 families out of the system.

Other news

The Government announced it is committed to protecting workers employed by umbrella companies, ensuring fair, genuine competition in the market and preventing tax non-compliance. It will provide an update on the recent consultation shortly, and in the summer will also publish new guidance to support workers and other businesses who use umbrella companies.

Read more analysis in our Spring Budget 2024 hub.