National Insurance contributions
The Chancellor has previously announced major changes to the National Insurance contributions (NICs) system.
Employees and NICs
Following the Autumn Statement in 2023 the government cut the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024. The government has further cut the main rate of Class 1 employee NICs from 10% to 8% from 6 April 2024.
Comment
According to the government, building on changes made at the Autumn Statement the government has cut taxes again for 29 million people with the average worker on £35,400 receiving a cut in 2024/25 of over £900.
The self-employed and NICs
The self-employed generally have to pay two forms of NICs: Class 2 and Class 4.
Firstly, the government will amend Class 2 self-employed NICs from 6 April 2024. This means that, from 6 April 2024:
- Self-employed people with profits above £6,725 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying NICs.
- 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.
Comment
This will mean that a self-employed person who currently pays Class 2 NICs will save at least £192 per year.
Secondly, the government will cut the main rate of Class 4 self-employed NICs from 9% to 6% from 6 April 2024.
Comment
This will benefit around two million individuals, recognising the contribution of the self-employed to the economy and ensuring that work pays for all.
According to the government, combined with the removal of the requirement to pay Class 2 NICs, this will save an average self-employed person on £28,000 £650 a year.
Extension of NICs relief for hiring veterans
The government is extending the employer NICs relief for businesses hiring qualifying veterans for a further year from April 2024 until April 2025. This means that employers will continue to pay no employer NICs up to annual earnings of £50,270 for the first year of a qualifying veteran's employment in a civilian role.
National Living Wage and National Minimum Wage
The government has accepted in full the recommendations of the Low Pay Commission and announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2024. In addition, from 1 April 2024 the NLW will be extended to 21 and 22 year olds. The rates which will apply from 1 April 2024 are as follows:
| |
NLW |
18-20 |
16-17 |
Apprentices |
| From 1 April 2024 |
£11.44 |
£8.60 |
£6.40 |
£6.40 |
The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.
Comment
The Department for Business and Trade estimates 2.7 million workers will directly benefit from the 2024 National Living Wage increase.
Taxable benefits for company cars
The rates of tax for company cars remain frozen for 2024/25. Future car benefit rates have been announced for 2025/26 to 2027/28:
- For 2025/26, the rates for emissions under 75gm/km increase by 1%.
- For 2026/27, the rates for emissions under 75gm/km increase by a further 1%.
- For 2027/28, the rates for emissions under 75gm/km increase by a further 1%.
The charge for electric cars will rise from 2% to 5% over that period.
For cars with emissions of 75gm/km and above, there will be a 1% rise in 2025/26 only, subject to a maximum of 37%.
From 6 April 2024 the figure used as the basis for calculating the benefit for employees who receive free private fuel from their employers for company cars remains £27,800.
Company vans
For 2024/25 the benefit remains £3,960 per van and the van fuel benefit charge where fuel is provided for private use remains £757. If a van cannot in any circumstances emit CO2 by being driven, the cash equivalent is nil.