Autumn Statement: Workers to pay less in national insurance

Both employees and self-employed workers will pay less in National Insurance from next year, Chancellor Jeremy Hunt has announced in today's Autumn Statement.

Read the full story:
Autumn Statement: Workers to pay less in national – but rate cuts don't offset the freezing of personal tax thresholds

If you haven't already, join the forum to reply.

Comments

  • re: your interpretation of class2 NIcs being abolished - are you sure?

    1) would mean class2 hasn't been abolished at all, just made voluntary

    2) would be highly regressive: earn 6725-12569 pay no NI or income tax yet get a pension credit; but earn less than 6725 have to buy a pension credit by paying voluntary NI

    3) when they last floated the idea of cancelling class2 (around 2016) it was suggested only way for self-employed low earners to get pension credit after class2 was abolished would be to pay voluntary class3 (which is five times the cost of class2) 
  • uknick
    uknick Posts: 1,604
    First Anniversary Name Dropper First Post
    Forumite
    The official Government press statement

    Chancellor backs business and rewards workers to get Britain growing - GOV.UK (www.gov.uk)

    says this;

    "The weekly Class 2 NICs – the flat rate compulsory charge which is currently £3.45 paid by self-employed people earning more than £12,570 - will effectively be abolished, with no-one required to pay from April 2024. Access to contributory benefits will be maintained and those currently paying voluntarily will still be able to do so at the same rate."

    Take from that what you will.

    I'm not at all sure how they think it will work.  For example, I pay only Class 2 voluntarily because my self employed income is very low as I wind it down.  Are they going to introduce a system with a cut off, e.g. anybody already claiming prior to January 2024 will still be able to do so, those starting after this date won't be able to claim Class 2.

    They've tried to abolish Class 2 before and failed, I'm not sure what whizz bang scheme they've thought up this time to abolish it.
  • molerat
    molerat Posts: 31,551
    Name Dropper Photogenic First Post First Anniversary
    Forumite
    edited 23 November 2023 at 12:02PM
    With these changes there is now no need for voluntary class 2, it should be abolished. Earn enough you get credits or pay the relevant NI rate, don't earn enough you can pay class 3, what is wrong with that ?
  • uknick
    uknick Posts: 1,604
    First Anniversary Name Dropper First Post
    Forumite
    molerat said:
    With these changes there is now no need for voluntary class 2, it should be abolished. Earn enough you get credits or pay the relevant NI rate, don't earn enough you can pay class 3, what is wrong with that ?
    From a purely selfish point of view, and let's be honest most people demonstrate this with regard to tax, I currently pay about £160 per year on less than £1k per year taxable profits to get Class 2 NI pension credits.

    If they're abolished I have to pay Class 3 at about £800 per year.

    I can see lots wrong with that.


  • The increase by just over £1 per hour in the national Minimum wage is another sly tax steal ( Albeit helping the low paid )
    It costs the government nothing, as the employers pay it, and £1 an hour gives a 37 hour per week person an extra £1924  per year.
    BUT the  chancellor gets 20% of that in tax which is £384 per year for every minimum wage employee in the country;

    That's 1.6 million people according to the Governments own 2023 stats
    So a total of an extra £614 extra million tax raise through an ostensibly charitable gesture, much of it coming out of the thin profits of struggling small businesses ( and this is all about growth?).

    On the minimum wage you will now be liable for tax and national insurance on £10,000 of your "minimum wage".
    That's around £3000.

    From 1.6 million people  who cant legally earn a smaller wage than they are on?

  • Hoenir
    Hoenir Posts: 1,220
    First Post Name Dropper
    Forumite
    edited 23 November 2023 at 12:48PM
    The increase by just over £1 per hour in the national Minimum wage is another sly tax steal ( Albeit helping the low paid )


    If the £1 remained with the employer as profit then it would still likely be taxed in some form. Remember the employer also has to pay Employers National Insurance which generates further tax revenue. The employee themselves also benefits from higher employer pension contributions.  In essence it's just moving the pieces around the board. 
  • molerat
    molerat Posts: 31,551
    Name Dropper Photogenic First Post First Anniversary
    Forumite
    uknick said:
    molerat said:
    With these changes there is now no need for voluntary class 2, it should be abolished. Earn enough you get credits or pay the relevant NI rate, don't earn enough you can pay class 3, what is wrong with that ?
    From a purely selfish point of view, and let's be honest most people demonstrate this with regard to tax, I currently pay about £160 per year on less than £1k per year taxable profits to get Class 2 NI pension credits.

    If they're abolished I have to pay Class 3 at about £800 per year.

    I can see lots wrong with that.


    I can see it from your viewpoint but why should you "earning" £1K per year be treated differently to an employed person earning the same ?

  • uknick
    uknick Posts: 1,604
    First Anniversary Name Dropper First Post
    Forumite
    molerat said:
    uknick said:
    molerat said:
    With these changes there is now no need for voluntary class 2, it should be abolished. Earn enough you get credits or pay the relevant NI rate, don't earn enough you can pay class 3, what is wrong with that ?
    From a purely selfish point of view, and let's be honest most people demonstrate this with regard to tax, I currently pay about £160 per year on less than £1k per year taxable profits to get Class 2 NI pension credits.

    If they're abolished I have to pay Class 3 at about £800 per year.

    I can see lots wrong with that.


    I can see it from your viewpoint but why should you "earning" £1K per year be treated differently to an employed person earning the same ?

    No reason at all and it always seemed strange you could do that with Class 2.  But, it wouldn't seem English not to whinge about something in the budget  :)
  • Jeremy535897
    Jeremy535897 Posts: 10,375
    First Post First Anniversary Name Dropper
    Forumite
    I have always thought that it was illogical to pay voluntary class 2 NIC if you earned up to £6,725, but then pay no class 2 NIC if profits were £6,726 to £12,570, and then compulsory class 2 if profits were above £12,570. Now that latter charge has gone, but it implies that the voluntary charge remains for profits under £6,725.

    But paragraph 3.11 of the Autumn statement says:
    3.11 The government will set out next steps on Class 2 reform next year. As part of this reform the government will protect the interests of lower paid self-employed people who currently pay Class 2 NICs voluntarily to build entitlement to certain contributory benefits including the State Pension. This is a progressive reform, giving lower-paid self-employed individuals a significant tax cut. It simplifies the system for self-employed taxpayers, reducing needless complexity, freeing up valuable time for them to grow their businesses rather than interacting with the tax system. This builds on the Spring Statement 2022 decision to ensure that self-employed individuals with profits between the Small Profits Threshold and Lower Profits Threshold could continue to build up National Insurance credits without paying Class 2 NICs.

    Yet those who are employees have to pay expensive class 3 voluntary contributions if they earn £122 a week, but nothing if they earn £124 a week. The whole thing is idiotic. Another issue is that if your turnover is under £1,000, it actually makes sense to register as self employed, even though you are under the limit, so you can pay voluntary contributions at the class 2 rate rather than the class 3 rate. This will be even more beneficial if you get the credit without the payment.
Meet your Ambassadors

Categories

  • All Categories
  • 341.7K Banking & Borrowing
  • 249.7K Reduce Debt & Boost Income
  • 449.2K Spending & Discounts
  • 233.9K Work, Benefits & Business
  • 606K Mortgages, Homes & Bills
  • 172.5K Life & Family
  • 246.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards