UK Budget 2024 – Blog 6 – National Insurance for the Self-Employed

Self-employed individuals with profits of more than £12,570 a year pay two types of NIC: Class 2 and Class 4.

Two key changes come into effect from 6 April 2024, as previously announced in the UK Government Autumn Statement 2023 and further extended in the UK Budget 2024:

1. The main rate of Class 4 NICs will be cut from 9% to 6% in 2024/2025. Class 4 NICs will continue to be calculated at 2% on profits over £50,270.
2. Class 2 NICs will effectively be abolished, saving £179.40 per annum.

So what?

This NIC reduction means that a sole trader with, say, trade profits of £50,000 will pay £1,302 less NICs in 2024/2025 than will be due for the 2023/2024 tax year.  Please be aware that this saving may not be felt until the 2024/2025 self-assessment balancing payment is made on or before 31 January 2026.

Entitlement to state benefits including the state pension

If you are self-employed, your Class 2 NIC payments have ensured you accrue entitlement to a range of state benefits, including the state pension.

If your profits exceed £6,725 in 2024/2025 you will continue to accrue entitlement to state benefits despite not paying Class 2 NICs.

If your profits are less than £6,725, or you make a loss, you may need to pay Class 2 NICs on a voluntary basis to maintain your state benefit entitlement.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.