Autumn statement 2023: national insurance changes

Autumn Statement 2023: National Insurance changes

An overview of key changes relating to payroll following the Autumn statement.

The CIPP recommends employers to use payslip messaging in January to ensure employees are aware of why they will have seen a reduction in the amount of NI contributions on their payslip.

The 2023 Payslip Statistics Report shows that from the employers who used the payslip messaging for the implementation of the Health and Social Care Levy, 77% confirmed they did not receive any further queries around the changes NI into the payroll department.

CIPP research shows this method of communication works wonders in informing employees of changes, alongside reducing the number of queries received by the payroll department / service provider.

Changes for employees 

The main rate of Class 1 employee National Insurance contributions (NICs) will be reduced to 10% from 6 January 2024. This mid tax year change takes shape in a 2-percentage point decrease.

Employees whose employer, or the employer’s payroll service provider, can make the relevant changes to their payroll system in time, over an already busy festive period, will benefit from the reduced rate of NI from January.

For those employers and service providers who do not 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.

The government has confirmed they will freeze the Lower Earnings Limit (LEL) at 2023/24 levels in 2024/25, resulting in the LEL remaining at £6,396 per annum (£123 per week). This point at which employees start to receive NI credits, “supports low income working individuals by maintaining their access to NICs credits, without having to pay NICs.” 

Changes for the self-employed  

Key changes to NI for the self-employed.

  • from 6 April 2024, Class 2 NI for the self-employed will be abolished.
  • a cut to Class 4 NICs, which is the main rate of self-employed NI, will take effect on 6 April 2024, reducing to 8%.

It has since been confirmed in the National Insurance factsheet, that:

  • ”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 including the state pension, will continue to be able to do so. The weekly rate they pay will be frozen at £3.45 for 2024/25, rather than rising by CPI to £3.70”
  • ”the Small Profits Threshold - the point at which the self-employed start to receive National Insurance credits – has been frozen at £6,725, in line with last year’s approach. This supports low income working individuals by maintaining their access to contributory benefits, without having to pay NICs.”

The below table of key NI rates and thresholds from 6 April 2024 has since been published:

NICs Primary Threshold / Lower Profits Limit        £12,570 (annual)

Class 1 NICs Main Rate (from 6 January 2024)      10%

Class 4 NICs Main Rate                                                   8%

Lower Earnings Limit                                                       £6,396 (annual)

Small Profits Threshold                                                  £6,725 (annual)

Class 2 Rate (for those paying voluntarily)              £3.45 (per week)

Class 3 Rate                                                                        £17.45 (per week)

Source: CIPP