How national insurance cuts will affect self-employed workers
Next year, one class of national insurance for self-employed people will be scrapped while another will be reduced. The chancellor says this will save the average self-employed worker 拢350 a year. Here is what you need to know.
Wednesday 22 November 2023 17:08, UK
National insurance will be cut for 29 million workers - two million of them self-employed - Chancellor Jeremy Hunt announced in the autumn statement.聽
Here is what you need to know.
What are the changes for self-employed people?
If you're self-employed and your profits are above £12,570 a year, you usually pay Class 2 and Class 4 national insurance rates.
Class 2 national insurance - currently £3.45 a week - will be scrapped entirely from April 2024.
Class 4 national insurance is currently 9% on profits between £12,570 and £50,270 and 2% on profits over £50,270.
It will be cut from 9% to 8% on profits between £12,570 and £50,270. The 2% rate will remain the same over £50,270.
Together the changes will mean an average total saving of around £350 for someone earning £28,000 a year, the government said.
Mr Hunt said: "As part of our plans to grow the economy, I want to reform and simplify the taxes paid by the self-employed.
"So today I am announcing a major reform of one of those taxes. It is one most people haven't heard of, but it is a big deal for those who have to pay it.
"Class 2 National Insurance is a flat rate compulsory charge, currently £3.45 a week, paid by self-employed people earning more than £12,570 which gives state pension entitlement.
"Today, after careful consideration and in recognition of the contribution made by self-employed people to our country, I can announce we are abolishing Class 2 National Insurance altogether, saving the average self-employed person £192 a year.
"Because we value their work, I'm also taking one further step for the self-employed.
"They pay Class 4 National Insurance at 9% on all earnings between £12,570 and £50,270.
"Today, I have decided to cut that tax by 1 percentage point to 8% from April. Taken together with the abolition of the compulsory Class 2 Charge, these reforms will save around 2 million self-employed people an average of £350 a year from April."
Read more:
All the key announcements from the autumn statement
National insurance to be cut from 12% to 10%
What are the changes for employees?
From 6 January, employees will pay 10% on their earnings between £12,570 and £50,270 - down from the current 12%.
Chancellor Jeremy Hunt said this would mean the average worker earning £35,400 a year would be £450 a year better off.
You can use Sky News' personal tax calculator to work out what the change will mean for you.
It will impact about 27 million workers.
Will cuts to national insurance affect the NHS?
The chancellor said the cuts "will not lead to any change in NHS funding or pension payments".
"Services will remain unchanged and continue to be funded as they are now," he said.
Who pays national insurance?
People between 16 and state pension age who earn more than £12,570 pay national insurance.
What is happening to the national insurance threshold?
The threshold for national insurance - the amount you must earn before you start paying it - has been frozen at £12,570.
Thresholds used to rise every year, typically in line with inflation. But the chancellor has said they will stay the same until April 2028.
This means as wages rise, more people will have to pay national insurance.