Overview

• UK Chancellor Jeremy Hunt has announced a reduction in the Class 1 National Insurance rate from 12% to 10% effective from January 6, 2024, resulting in an average saving of over £450 a year for workers earning between £12,570 and £50,270.
• Changes to National Insurance for self-employed workers will also come into effect from April 2024, with Class 2 contributions being abolished and the Class 4 rate dropping from 9% to 8%, leading to an average annual saving of £350 for two million self-employed workers.
• Despite these reductions, some analysts argue that workers will only be marginally better off due to frozen tax thresholds and fiscal drag, with some earners seeing a pay boost of just £2.68 a week.
• The number of self-employed workers has dropped by around 700,000 since the end of 2019, attributed to the rising tax burden and disruption caused by Covid-19 and changes to off-payroll tax rules known as 'IR35'.
• National Insurance contributions fund various state benefits, including the state pension, with the amount of state pension received dependent on the number of 'qualifying years' of contributions made.