NIC changes for the self-employed
In the recent Autumn Statement, the Chancellor announced two important changes to National Insurance contributions (NIC) for the self-employed.
The first change concerns the removal of Class 2 NICs for the self-employed. This means that self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs from 6 April 2024. Class 2 NICs are currently paid by the self-employed in order to qualify for benefits such as the state pension.
This change effectively abolishes Class 2 NICs for some two million self-employed people. The self-employed benefitting from this change will continue to receive access to contributory benefits including the State Pension.
Those currently paying Class 2 NICs voluntarily will still be able to do so at the same rate. This includes those with profits under £6,725 (Small Profits Threshold) and others who pay Class 2 NICs voluntarily to access contributory benefits including the State Pension. The weekly rate for making voluntary Class 2 NICs will be frozen at the current rate of £3.45 for 2024-25, rather than rising by CPI to £3.70. The Small Profits Threshold will also remain frozen at £6,725 for 2024-25.
Secondly, the Chancellor announced that the main rate of self-employed National Insurance, Class 4 NICs, on all earnings between £12,570 and £50,270 will be cut by 1%, from 9% to 8% from April 2024. This is worth £350 for the average self-employed person on £28,200.