NIC Cuts and What They Mean for You

Let’s dive into the latest updates from the 2024 Spring Budget that have everyone talking: the much-anticipated cuts to National Insurance Contributions (NICs) for both employees and the self-employed. So, what does this mean for you and your pocket?

For the Hardworking Employees

Imagine keeping a bit more of your hard-earned cash each month. Due to changes by the Chancellor, starting from 6 January 2024, that’s no longer just wishful thinking. The primary rate of Class 1 NICs, paid by you on salaries between certain thresholds, has been sliced from 12% to a more palatable 10%. And there’s more good news: this rate will dip even further to 8% for the 2024/25 financial year, potentially saving you up to £754. That’s a nice little bonus, wouldn’t you say?

Here’s the nitty-gritty: you’ll pay 8% on earnings between the primary threshold (£242 per week/£1,048 per month) and the upper earnings limit (£967 per week/£4,189 per month). Earn above this upper limit? You’ll only be charged 2%. And if you’re earning between the lower earnings limit and the primary threshold, you’ll still clock up those all-important qualifying years for your state pension, without parting with a penny.

For the Business Owners and Freelancers

No one’s forgotten about the self-employed heroes out there. Following the Autumn Statement’s initial 1% cut, the Spring Budget has gone one better, reducing the main rate of Class 4 NICs by an additional 2% to a mere 6%. This applies to profits between £12,570 and £50,270, with earnings above this threshold attracting a 2% charge. And for those of you with profits under the small profits threshold (£6,725), there’s the option to make voluntary contributions to maintain your state pension credits, even though Class 2 contributions have bid us farewell.

Employers, Listen Up

It’s not all confetti and balloons, I’m afraid. Employers will see no change in their NIC rates, with the secondary rate holding steady at 13.8% for the 2024/25 year. It’s important to factor this into your financial planning.

How Can We Help?

At Jon Davies Accountants, we understand that keeping up with these changes can feel like trying to catch a cloud. That’s why we’re here: to clear the fog and help you navigate how these updates impact you or your business. Whether you’re dancing at the thought of extra pennies in your pocket or scratching your head about what this means for your payroll, we’re just a call or email away.

Thinking about how to maximize these new tax benefits? Don’t let the opportunity slip through your fingers. Get in touch with Jon and the team for bespoke advice tailored to your unique situation. Let’s make sure you’re getting every advantage you’re entitled to.

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Any questions?

If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant