Class 1 employee NICs are to be reduced by 2 percent from 12 percent to 10 percent from 6 January 2024. The NICs payable by the self-employed will also be reduced. From 6 April 2024, the main rate of Class 4 NIC, which is applied to trading profits between £12,570 and £50,270, is being reduced by 1 percent from 9 percent to 8 percent. And Class 2 NIC is being abolished from 6 April 2024.
From the same date, self-employed taxpayers with profits above £12,570 who will no longer be required to pay Class 2 NICs, will continue to receive access to contributory benefits, including the State Pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit without paying NICs as they do currently. Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits will continue to be able to do so. The government will set out next steps on Class 2 reform next year.
Broadly, the cuts to Class 4 and Class 2 NIC together amount to a tax saving of £350 a year for the average self-employed person on £28,200. According to official documents, it’s expected that some 2 million self-employed individuals will benefit.