We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA
HMRC rates tables updated
As mentioned in our recent Autumn Statement Summary, class 1 NIC contributions were cut with effect from 6 January 2024. Following the launch of the new NIC rates from this date, HMRC has updated the rates and tables on GOV.UK and within internal HMRC guidance manuals.
The National Insurance Contributions (Reduction in Rates) Act 2023 brought significant changes to employee and self-employed NIC rates, impacting contributions for the 2023/24 tax year.
Effective from 6 January 2024, the act lowers the main rate of employee class 1 NICs from 12% to 10%. Additionally, for the self-employed, the main rate of class 4 NICs is reduced by 1 percentage point, from 9% to 8%, with the removal of the weekly class 2 flat rate for those with profits exceeding £12,570 from 6 April 2024. Importantly, individuals will still retain access to contributory benefits, including the state pension.
Primary Class 1 NICs rates for 2023/2024
All employees excluding directors
Where the earnings are paid on or before 5 January 2024:
- main primary percentage – 12%
- married women and widows’ reduced rate – 5.85%
Where the earnings are paid on or after 6 January 2024:
- main primary percentage – 10%
- married women and widows’ reduced rate – 3.85%
Directors’ blended rate
Directors, operating on an annual earnings period, encounter a blended rate calculation. This average rate considers 275 days at the initial rate of 12% and 91 days at the new rate of 10% resulting in a blended rate of 11.5%.
Where a director is paid using the alternative arrangements, then their class 1 NICs are calculated as if they were an employee, but the blended rates apply to the end-of-year reconciliation. Where the standard method is used, then the blended rates apply for the whole of the tax year.
There is no change to the additional rate of primary class 1 NICs, the rate of secondary class 1 NICs, the rate of class 1A NICs or the rate of class 1B NICs.
See NIM01615 for the directors’ blended rate for 2022/23 and guidance generally on how to calculate National Insurance for company directors.
Annual maximum adjustments
The rules governing the annual maximum calculation have been revised for the 2023/2024 tax year due to the rate changes. Regulation 21(2) of the Social Security (Contributions) Regulations 2001 introduces a blended rate of 11.5% for the main primary percentage, impacting the determination of the annual maximum.
See NIM01251 for guidance about the annual maximum and NIM01279A for an example for the 2023-24 tax year.