The 2024 National Insurance Update: Essential Information
The UK government's Autumn Statement in November 2023 brings a significant change effective from 6th January 2024. The Class 1 employee National Insurance contributions rate will decrease from 12% to 10%. This adjustment is crucial for payroll calculations.
Thresholds and Benefits for Employees Starting January 2024
Starting from April 2023, employees begin to pay National Insurance contributions when they earn above £190 per week (the primary threshold). As an example, with the new changes in 2024, an employee at XYZ Technologies Ltd., earning £30,000 annually, would previously contribute £2,009.60 in National Insurance (12% of earnings between £9,880 and £25,480). With the new rate of 10%, their contribution will now be £1,674.66, leading to an annual saving of £334.94.
Rates for Employers, Class 1a, and 1b
The contributions for Employers, Class 1a, and 1b remain unchanged. This is a good time for businesses to review their payroll systems for compliance and efficiency and we can help with this, simply get in touch for a no obligation chat.
Unchanged National Insurance Thresholds
For anyone unclear about the terminology, Lower Earnings Limit (LEL) and Primary Threshold. The LEL, at £123 per week for 2023/24, is the minimum earnings level qualifying for certain benefits such as State Pension, with no National Insurance deducted on it. The Primary Threshold, £190 per week, marks where National Insurance contributions begin. These thresholds are crucial for calculating National Insurance, particularly with the upcoming 2024 changes.
- The Lower Earnings Limit (LEL) remains at £123 per week.
- The primary threshold changes to align with the £12,570 personal annual tax allowance.
Important Considerations for Payroll Management
Directors have unique considerations. For example, Jane Doe, a Director at ABC Manufacturing Ltd., will need her NICs recalculated to reflect the mixed Class 1 rate if she leaves within the 2023/24 tax year. If using an alternate NIC calculation method, she must switch to the cumulative calculation in her final pay period of the year.
Salary Sacrifice Schemes
The savings from these schemes will be affected by the decrease in National Insurance. Eligibility might need reassessment, especially in light of wage increases.
New Online Calculator for National Insurance Changes
A new tool on GOV.UK is available for individuals and businesses, like XYZ Technologies Ltd. and ABC Manufacturing Ltd., to assess the impact of these National Insurance changes. Visit the National Insurance Calculator.
Crystal HR & Payroll Ltd is here to help you navigate these changes smoothly. Whether you're an employee at a restaurant or a director at a manufacturing company, our team can offer tailored advice and solutions. Contact us at Crystal HR & Payroll Ltd for a no-obligation chat.