The Class 1 employee National Insurance contributions rate has been reduced from 12% to 10% from 6 January 2024, as stated by the government in the Autumn Statement in November 2023.
Where the employer is able to make the changes to their payroll system in time, employees will benefit from the reduced rate of NI from January.
For those employers who aren’t able to amend their payroll system in time for the January changes, they will be able to reimburse the overpayment of NI to employees in subsequent months.
Employers, Class 1a, and 1b remain unchanged and directors remain on a blended rate for 23/24.
National Insurance thresholds remain unchanged, in line with the freeze confirmed in the Spring Budget
The LEL remains at £123 per week for qualification of payments and benefits
The primary threshold remains linked to the tax allowance of £12,570 per annum
In light of the above changes, there are some key considerations:
- Directors – if they left within the 2023/24 tax year, their NICs will need to be recalculated to take the blended rate of class 1 NICs into consideration. If they are still in employment and have their NICs calculated using the alternative method, this will need to be changed to the cumulative calculation in their final pay period of the tax year, to ensure their NICs are calculated using the blended rate.
- Salary Sacrifice – There will be reduced savings due to the decrease in National Insurance and eligibility for schemes will need to be checked due to the NMW/NLW increases.
A new online tool has been launched on GOV.UK for anyone to Estimate how the January 2024 National Insurance contributions changes will affect you for the main Class 1 employee rate change.
