The recent Autumn Statement announced some significant changes that will affect companies’ payrolls. In particular, the main rates of National Insurance for employees and the self-employed have been cut. These changes will come into effect on the 6th January 2024. Read our payroll update to find out more.

The Chancellor, Jeremy Hunt, stated that the aim of these reductions to National Insurance is to help grow the economy. These changes will amount to £9.3 billion in 2023/24 and similar amounts each subsequent year.

This payroll update outlines the key changes that come into effect in January 2024. If you have any questions about how the new legislation announced in the Autumn Statement could affect you and your payroll, please get in touch with the Payroll Team at RA Accountants.

NI changes

Changes for employees

The main rate of class 1 employee 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.

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

Hunt also announced key changes to NI for the self-employed:

• From 6 April 2024, class 2 NICs 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

This was done, in part, to stimulate a sluggish economy. With taxpayers dealing with a soaring cost of living, a fall in national insurance will provide some relief. With several more payroll changes on the cards for 2024, it’s essential to stay alert and understand what’s coming. Employers will need to ensure they’re deducting the correct amount of tax and not breaching the new national living wage. Conversely, employees must check their payslips and ensure they receive what they’re entitled to.

Payroll update – Find out more

If you have any questions about the changes for 2024 discussed in this payroll update, please contact the Payroll Team at RA Accountants. We would be very pleased to hear from you.

For further information
Gov.uk – Autumn Statement 2023: National Insurance Fact Sheet
RA Accountants’ Guide: The Autumn Statement Explained