What does the National Insurance cut mean for me and my salary?

Chancellor Jeremy Hunt announced tax cuts for both the self-employed and ordinary working Britons in his Autumn Statement.

Mr Hunt vowed to “reduce the debt, cut taxes and reward work” as he unveiled a package aimed at bailing out cash-strapped Britons and boosting the economy.

2

2

He cut National Insurance, boosted Universal Credit benefits and raised the National Living Wage.

Below we explain clearly how the National Insurance deduction affects your salary.

What does this mean for workers?

The average worker is set to receive a £450 pay rise due to a two per cent cut in the main rate of National Insurance Contributions (NICs).

The main 12% rate of employee NI, also known as Class 1 NIC, will be cut.

From January 6, the rate will be cut by two percentage points from 12% to 10%.

The change will help 27 million people and mean someone earning an average salary of £35,000 will save more than £450.

According to the Treasury, depending on your role and income, you could take home up to £600 more per year due to the tax cut.

For example, a senior nurse with 5 years’ experience on £42,618 would receive an annual benefit of £600.

An average full-time nurse on £38,900 will receive an annual benefit of more than £520.

A police officer on £44,300 would receive an annual benefit of more than £630.

Plus, a typical junior doctor on £63,000 would receive an annual benefit of more than £750.

Even a night shift cleaner on £21,000 would make a profit of £170.

On £44,300 the average teacher will receive an annual benefit of more than £630.

And a hard-working family of two earners on the average earnings of £35,404 would be £900 better off.

What does this mean for the self-employed?

The self-employed will get an income boost of up to £350 due to the abolition of some NICs in today’s Autumn Statement.

It is also cutting one percentage point from the rate charged for Class 4 NICs.

The move will save two million self-employed workers £350 a year from April.

Class 2 and Class 4 NI are paid by self-employed Britons who earn profits of £12,570 or more per year.

Class 2 NI is a flat rate mandatory fee, currently £3.45 per week, paid by self-employed people earning more than £12,570 which entitles them to a state pension.

But from April 2024, the government is scrapping Class 2 National Insurance altogether, saving the average self-employed person £192 a year.

The same workers pay Class 4 NI at a rate of 9% on all earnings between £12,570 and £50,270.

But from April that rate is being reduced by one percent to 8%.

What is National Insurance?

National Insurance is a tax on your earnings, which is placed into a fund to be used for certain state benefits.

This includes state pension, statutory sick pay, maternity leave and unemployment benefits.

If you’re a UK citizen, you should automatically get an NI number and card before you turn 16.

This number allows the government to track your earnings and apply the correct amount of tax.

Who pays National Insurance?

You pay National Insurance if you’re aged 16 or over and have any of the following:

• An employee earns more than £242 per week
• Self-employed and earning profits of £6,725 or more per year

It is deducted from your salary every month.

If you are employed, you can check your contribution by looking at your salary slip.

Once you reach state pension age, you don’t need to pay it at all.

There are different types of National Insurance – known as “classes” – and the type you pay depends on your employment status and how much you earn, and whether there are any gaps in your National Insurance record. Does.

What are the current NIC limits and how much do I have to pay?

The National Insurance payment limit is currently £12,570 a year for employed workers and £6,725 for the self-employed.

A change in April last year led to millions of workers paying 1.25% more NI, but from November 6 that rise was reversed, saving workers an average of £330 a year.

But the rates fell from 13.25% to 12% and from 3.25% to 2% – the same as before April 2022.

If you’re employed, you’ll start paying National Insurance when you’re 16 or older.

Most people now pay 12% NICs on any earnings between £242 and £967 per week.

You’ll also have to pay 2% on earnings over £967 per week – or £4,189 per month.

Those earning less than this amount do not have to pay any National Insurance.

The self-employed start paying when they make profits of at least £6,725 per year.

If you’re self-employed you’ll need to complete a self-assessment tax return and pay NICs and income tax yourself.

The exact amount you pay will depend on how much you earn as it is a percentage of your earnings between these amounts.