United Kingdom

National Insurance (“NI”) rates and thresholds

On 22 November 23, the Chancellor of the Exchequer announced the following changes to National Insurance.

• For the 2023/24 tax year, employees currently pay Class 1 NI at 12% on earnings between £12,571 and £50,270 and 2% on any earnings above that. Employers also currently pay Class 1 NI at 13.8% on their employees’ earnings year above £9,100.  
• On 22 November 23, the Chancellor announced that the main rate of employee Class 1 NI will  be cut by 2% from 12% to 10% with effect from 6 January 2024.
• Self-employed individuals pay Class 2 and Class 4 NI.. Currently, Class 2 NI is a flat rate of £3.45 per week where profits are above £12,570 and Class 4 NI is at 9% for profits between £12,570 and £50,270 and 2% on any profits above that. 
• On 22 November 23, the Chancellor announced that compulsory Class 2 National Insurance will be abolished from April 2024. Access to entitlements and credits will be maintained in full. Those who want to contribute voluntarily can still do so. 
• Class 4 National Insurance will be cut by 1% from 9% to 8% from April 2024.

Basis period reform

The UK Government has brought in significant changes to the way self-employed individuals are taxed on trading profits. The changes are called “Basis Period

Reform”. The new measures do not impact the UK taxation of non-trading income or capital gains. For further details see Basis period reform in the other issues section.