UK National Insurance Gets a Fresh Coat—Employees Get a Paltry 2p Off!
In a move that might ruffle very few feathers, Chancellor Jeremy Hunt cut the employee National Insurance (NI) rates in his Autumn Statement. From 6 January 2024 the main rates that employees owe on their earnings are now 10% (on the part over £12,570) and 2% (on the part over £50,270). That 2 penny shave will save workers a meagre chunk of a pound each month, but the cumulative effect over a lifetime could feel like a small victory for the average paycheck.
What the Numbers Say
- Old rates: 12% on earnings above £12,570, 2% on earnings above £50,270.
- New rates: 10% on earnings between £12,570 and £50,270, 2% on earnings above £50,270.
Self‑Employed? Those Got a Shake‑up Too!
The government decided to simplify things for the self‑employed starting 6 April 2024. Two main changes:
- The flat‑rate Class 2 NIC will be abolished entirely.
- The Class 4 rate, which used to be 9% on profits between £12,570 and £50,270, now drops to 8%. Above £50,270 the rate stays at 2%.
In plain English: If you run your own business, you’ll no longer pay that pesky small flat fee, but you’ll keep paying a slightly lower percentage of your profits. For many, the simplification could ease the mental health load of juggling tax forms.
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National Insurance Cut by 2% – A Windfall That Might Skirt the Regular
Seventeen‑second headline? But you know what’s trickier than figuring out your leave budget? Predicting what a 2% drop in National Insurance actually does to your bank balance. Turns out, it’s a win‑win for those already snug in a green pocket, but not so much for the rest of us.
The Numbers in a Nutshell
- Pop at 29 million: All workers, employed or self‑employed, will feel the pinch.
- Stand‑by: For most low‑income folks, the change is gentle—think of it as a polite pat on the cheek.
- Top‑tier: Those earning six‑figure salaries get a noticeable lift. Their take‑home will glow a little brighter.
Evelyn Partners’ Take‑Home Analysis
Bill the accountant in our story, Sian Steele, from Evelyn Partners, didn’t just scribble numbers on a whiteboard. She spun through the data and found a surprising twist:
- Employees catch more: While the Chancellor shouts about the self‑employed, the chart shows employees, across most income bands, getting a slightly bigger slice.
- What that looks like: If you make £40,000 a year, your monthly pocket probably grows by a few £, not a fortune, but still a welcome bump.
- Rankings up: Those already earning a lot feel the most boosting—like getting a new set of pocket‑knickers for free.
Real‑World Impact – A Quick Prism
Picture this: You’re on the payroll, wryly aware of that 12% top tax band. The 2% drop is your kind of heel‑inverted steak—good, but not a swoon. Meanwhile, entrepreneurs, especially those juggling multiple side‑hustles, see a smaller, sometimes negligible change. In plain talk, the policy is a gentle nudge for the well‑off.
Bottom Line – A Tiny Breeze That Depends on Your Gust
- Shallow 2% cut: Not a jackpot for most households.
- Need for Motion: Already high earners get the biggest “thank you” from the tax desk.
- Take‑away for you: If you’re on the payroll, it’s a small sweet treat. If you’re running a business, write down your “little dip,” but check for other reliefs.
So, don’t go giddy and salute the announcement just yet. It’s a subtle change that benefits the fortunate, while others will simply find their twenties a tick more handsome.
How Cutting National Insurance is Playing a Tiny Role in the Tax Party
Picture this: the Treasury is losing
£9 billion from the £172 billion that was earmarked for tax hikes. That’s the size of a small island, but it won’t topple the massive rise in direct taxes that has pushed the overall burden to a 70‑year high.
A Freezing Freeze in Tax Thresholds
Since 2021, the government has been freezing tax thresholds. Add to that the adjustment of the additional rate cut‑off to £125,140 in April 2023, and by 2027‑28 the Treasury will pocket an extra £29.3 billion a year. That’s basically a 4p bump on the basic income tax rate.
Why the Shift? Fiscal Drag at Work
- Millions’ wages climb into the
personal allowance and then the higher and additional rate thresholds. - People start paying tax on incomes they never paid before, or get nudged into higher rates.
NI Cuts vs. Income Tax Cuts: The Master Plan
Nicola Hunt has leaned on National Insurance (NI) rather than slashing income tax. Why? NI only hits work income. It can pass off a “reward” for labor while sparing the Treasury some extra cost.
And because NI isn’t charged on
private pension income (or on any earnings after the state pension age), retirees are largely left out of this benefit. That might help sidestep accusations of “inter‑generational unfairness” amid the hefty triple‑lock hikes to the state pension.
