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Changes to National Insurance for the Self Employed from April 2024




The Autumn Statement and Spring Budget both announced National Insurance Contributions (NICs) changes the self-employed.

 

The self-employed have had their main rate of Class 4 NICs reduced from 9% to 6%, and Class 2 NICs will no longer be due for the majority of self-employed people.  These reductions only benefit those below state pension age as National Insurance contributions are no longer due once you reach that age (with the exception of Class 4 NIC which is payable for a whole tax year in which you have not reached state pension age by the beginning of it).

 

Changes in Class 4 NICs

 

Class 4 NIC are based on the level of your taxable self-employed profits

 

Income in band

2023/24

2024/25

£0 - £12,570

0%

0%

£12,571 to £50,270

9%

6%

£50,271+

2%

2%

 

Changes in Class 2 NICs

 

Class 2 NICs in 2023/24 are payable at a flat weekly rate by most self-employed taxpayers aged between 16 and State Pension age. These are collected via Self-Assessment, along with any Class 4 NICs and Income Tax due.

 

Income in band

2023/24

2024/25

£0 - £6,725

Can pay voluntary contributions

Can pay voluntary contributions

£6,726 to £12,570

Class 2 Credits

Class 2 Credits

£12,570 +

£3.45 per week

Class 2 Credits

 

From April 2024

 

It was announced in the Autumn Statement that Class 2 NICs would be scrapped from April 2024.  However, they will still exist for those making voluntary contributions.

 

These changes mainly affect self-employed taxpayers whose profits exceed the Lower Profits Limit of £12,570.  They will no longer be required to pay Class 2 NICs, but will still benefit from entitlement to contributory state benefits such as the State Pension.

 

Those people who are self-employed who have profits between the £6,725 (Small Profits Threshold) and the £12,570 (Lower Profits Limit) will be unaffected.  After 06 April 2024 They will continue to benefit from a National Insurance Credit without having to actually pay any Class 2 NICs, just as they do for 2023/24.

 

Self-employed people whose profits are below £6,725 will also be unaffected by the changes as they will continue to have the option of paying voluntary Class 2 NICs in order to build their entitlement to the State pension and other contributory benefits.   For this group of taxpayers Class 2 has not been scrapped.

 

For 2024/25 the rate has been frozen at £3.45 per week and the Small Profits Threshold will also remain at £6,725.

 

Class 2 NICs may also be relevant after 6 April 2024 for individuals working overseas either as self-employed or as an employee. In some circumstances Class 2 NICs can be paid to count towards contributory state benefits. Further details are provided in HMRC's guide to paying NICs whilst abroad . Most other circumstances involving voluntary payment of NICs require payment of Class 3 NIC, which are more expensive.   In 2023/24 Class 3 weekly rate is £17.45, compared with just £3.45 for Class 2.

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