Spring Budget 2024 – National Insurance cuts: A Self Employed business perspective

Budget, National Insurance, Sole Trader,

The recent Spring Budget extended the National Insurance cuts first announced in last year’s Autumn Statement, bringing good news to all self-employed businesses.

The rate of Class 4 National Insurance, which is added as part of your tax bill at the year end, has been reduced again with effect from 6th April 2024. It will now drop from 9% to 6% for profits between £12,570 and £50,270. The rate for profits over £50,270 will continue to be 2%.

If your trade profits for the 2024/25 tax year were £50,000, this rate reduction would give you a saving of £1,302 compared to the 2023/24 tax year. Bear in mind though that you won’t necessarily feel this saving until you make your 2024/25 self assessment balancing payment on or before 31st January 2026.

As announced in last year’s Autumn Statement and further confirmed by the Spring Budget, Class 2 National Insurance will effectively be abolished. This will save £179.40 a year.

What do you need to do?

Good news! You don’t need to do anything to benefit from either of these National Insurance cuts. The reductions will automatically be applied to your Tax Calculation when your Tax Return is prepared.

Be careful – if your profits are below £6,725…

If you’re self-employed, your Class 2 National Insurance payments have been accruing your entitlement to a range of state benefits, including the state pension. 

  • If your profits exceed £6,725 in 2024/25 you will continue to accrue entitlement to state benefits despite not paying class 2 National Insurance. 
  • If your profits are less than £6,725, or you make a loss, you will need to make class 2 contributions voluntarily, at £3.45 per week, to maintain your state benefit entitlement.

The Government has announced that it will consult on how it will deliver the final abolition of Class 2 National Insurance contributions later this year. Once this happens there will likely be a new method or criteria for accruing state benefit entitlements.

As usual, we’ll let you know as soon as we hear any more.

You can see our Spring Budget Summary here.

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