Jeremy Hunt’s Autumn Statement earlier this week has shone a light on National Insurance, but what is National Insurance and what do the changes mean?

National Insurance contributions allow people to qualify for certain benefits and the State Pension. There are different types of National Insurance depending on your employment status and how much you earn.

Class 1 National Insurance applies to employees, while Class 2 and Class 4 relate to the self-employed.

Class 1 National Insurance;

If you are an employee aged 16 or over earning more than £242 per week (in the current 2023/24 tax year) you will have to pay Class 1 National Insurance. Contributions stop when you reach state pension age.

Earnings between £12,570 and £50,270 per year are currently taxed at 12%, earnings over £50,270 are taxed at 2%. From 6^th January 2024 this main rate of 12% is reducing to 10%, the 2% higher rate will remain the same. The government have calculated the average person earning £35,404  will be better off by £450 per year.

There is no change to the Class 1 National Insurance rate paid by employers.

Class 2 National Insurance;

Class 2 National Insurance is currently paid by self-employed individuals with profits of more than £12,570 per year. The current rate for 2023/24 is £3.45 per week, totalling £179.40 for the whole year, and is paid through self-assessment tax returns.

From 6^th April 2024 self-employed people with profits above £12,570 will no longer be required to pay Class 2 contributions, but will continue to receive access to contributory benefits including the State Pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits through a National Insurance credit, as they do currently. Those with profits below £6,725 and those who voluntarily pay Class 2 contributions to get access to contributory benefits will continue to be able to do so, the weekly rate will remain at £3.45 for 2024/25.

Class 4 National Insurance;

Class 4 National Insurance is currently paid by self-employed individuals at the rate of 9% on profits between £12,570 and £50,270 and 2% on profits above £50,270.

From 6^th April 2024 this main rate of 9% will be reduced to 8%, the higher rate of 2% will remain the same.

You stop paying Class 4 National Insurance from the 6^th April after you reach State Pension age.

Class 3 National Insurance;

If you have gaps in your National Insurance record you may be able to pay voluntary Class 3 contributions to fill the gaps and qualify for the State Pension. The Class 3 rate will continue to be £17.45 per week for 2024/2025. It is important to note voluntary contributions do not always increase your State Pension.

For more information on National Insurance rates and what the changes may mean for you, contact us at [email protected]