28 March 2024
6 April 2024 marks the start of a new tax year and the day the Chancellor’s second 2p cut to National Insurance (NI) contributions comes into effect for eligible workers, providing a much needed financial boost for households.
The change announced at the spring budget will see the main rate of primary Class 1 National Insurance contributions cut by two percentage points from 10% to 8%. This follows the two percentage point cut which came into play earlier in the year.
NI contributions are mandatory for those age 16 or over who are either an employee earning more than £242 a week from one job or are self-employed and making a profit of over £12,570 a year. These contributions enable workers to qualify for certain benefits, including the state pension and are a cornerstone of funding for crucial public services such as the NHS.
Quilter’s calculations show the Chancellor’s new 2p NI reduction, when combined with the original 2p reduction, will see a worker on the average salary of £34,944 take home an extra £17.21 a week, or £894.96 a year.
|
|
12% |
10% |
8% |
Total saving |
|
£20,000 |
£891.60 |
£743.00 |
£594.40 |
£297.20 |
|
£30,000 |
£2,091.60 |
£1,743.00 |
£1,394.40 |
£697.20 |
|
£34,944 |
£2,684.88 |
£2,237.40 |
£1,789.92 |
£894.96 |
|
£40,000 |
£3,291.60 |
£2,743.00 |
£2,194.40 |
£1,097.20 |
|
£50,000 |
£4,491.60 |
£3,743.00 |
£2,994.40 |
£1,497.20 |
Shaun Moore, tax and financial planning expert at Quilter, says:
“The Chancellor’s additional 2p cut to National Insurance will mean that from the start of the new tax year, millions of hard working Britons will see more money in their pockets each month.
“This change will certainly be a crowd pleaser with the average worker earning £34,944 a year being around £75 better off a month if you also take into account the national insurance cut announced at the Autumn Statement. However, while this cut will provide a much-needed boost for many, income tax thresholds remain frozen until 2028 which in reality may mean people are worse off.
“The Conservatives have been under significant pressure to shore up support as they head ever closer to the election, and whether this move will achieve this remains to be seen – particularly given the concerns around how much a cut will impact the NHS, schooling and other state support. In addition, this change gives nothing to pensioners who do not pay national insurance.
“For those who find themselves with a little extra spare cash each month as a result of the national insurance cut, it is worth considering how you can make the most of it. You might wish to put it away to build a rainy day fund, or perhaps invest it in your pension to help boost your quality of life at retirement. Seeking professional financial advice can help ensure you make the best possible financial decisions for your personal circumstances.”
