Employee and self-employed NICs main rates cut as of April 2024

The National Insurance Contributions (Reduction in Rates) Act 2024 cut the main rate of primary Class 1 National Insurance contributions (NICs) paid by employees from 10% to 8%, and cut the main Class 4 rate paid by the self-employed from 9% to 6%¹. The Act received Royal Assent on 20 March 2024 and all its provisions came into force on 6 April 2024¹. The reduction in employee NICs to 10% had been legislated in the National Insurance Contributions (Reduction in Rates) Act 2023, and the 2024 Act provided the further cut¹. The House of Commons Library records that the changes "took the main rate of employee NICs from 12% to 8%" across 2023 and 2024².

The Act applies in England, Wales, Scotland and Northern Ireland, and amends both the Social Security Contributions and Benefits Act 1992 and its Northern Ireland equivalent¹. The explanatory notes state that the Act "is intended to provide a further cut in the amount of NICs paid for 29 million working people, worth over £450 to the average employee earning £35,400 per annum and £310 to the average self-employed person with profits of £28,000 per annum"¹.

Separately, liability to pay Class 2 NICs was removed from 6 April 2024 under the National Insurance (Reductions in Rates) Act 2023³. From that date no self-employed person is liable to pay Class 2 NICs; those with profits at or above £6,725, the small profits threshold, are treated as having paid them, while those with profits under £6,725 can continue to pay Class 2 NICs voluntarily to maintain access to contributory benefits³. The regulations making the consequential amendments state that qualifying women, including their spouse and civil partner, will continue to be able to pay Class 2 NICs before their profits are established, to ensure entitlement to Maternity Allowance is maintained, and that those whose profits are later confirmed at or above the small profits threshold can apply to HMRC for a refund³.

The nidirect guidance on Maternity Allowance states that from April 2024 Class 2 contributions are treated as having been paid to protect the National Insurance record, and that a self-employed claimant who has not paid enough Class 2 National Insurance to get the standard rate will get between £27.00 and £194.32 a week for 39 weeks⁴. The standard rate is £194.32 a week, or 90 per cent of average weekly earnings if lower, for up to 39 weeks⁴.

Why it matters for households

The rate cuts change how much is deducted from pay for employees and from profits for the self-employed, from 6 April 2024, across all four nations of the UK¹. The employee rate had already been reduced from 12% to 10% in 2023, so the April 2024 change is the second cut in the main employee rate in two tax years². For the self-employed, the Class 4 rate falls from 9% to 6%, and the separate flat-rate Class 2 charge no longer applies to anyone, though the contribution record is protected for those with profits at or above £6,725³.

The Class 2 change also affects benefit entitlement calculations. Class 2 NICs are used in earnings calculations for Housing Benefit, Jobseeker's Allowance and Employment and Support Allowance, and in calculations of reductions in Council Tax liability; the 2024 regulations remove references to Class 2 NICs from those calculations because the figure would now be nil³. Maternity Allowance entitlement for self-employed claimants depends on Class 2 contributions, and the option to pay them before profits are established remains⁴.

The House of Commons Library notes that income tax thresholds have been frozen at their April 2021 levels, so taxpayers pay more income tax on their income than if thresholds rose with inflation². It also records that in April 2024 benefits linked to inflation were uprated by 6.7%, and that the basic and new State Pension rose by 8.5% for 2024/25².

What happens next

The rate cuts and the removal of Class 2 liability took effect on 6 April 2024³. The regulations on Class 2 include a retrospective change applying to the 2022-23 tax year and subsequent years, covering late filing of Self Assessment tax returns and a residence and presence condition for those treated as having paid Class 2³. HMRC said guidance on the Class 2 changes would be updated and published on GOV.UK³. No further rate changes for 2024/25 are set out in these documents.