On top of the 1p cut to the National Insurance rate that was announced in last year’s Autumn Statement, the Spring Budget announced in March 2024 introduced a further 2p cut.
This means that for self-employed workers paying Class 4 National Insurance contributions (NICs), the rate will drop from 9% to 6% for the tax year from April 2024 to April 2025.
Maximum NIC savings
Class 4 contributions are paid on annual profits from £12,570 to £50,270 – so the 3% rate reduction represents potential savings of up to £1,131 in the current tax year.
The abolition of Class 2 NIC requirements also means that self-employed people making more than £6,725 a year in profits will no longer have to pay the weekly rate of £3.45, saving £179.40 a year.
For the average self-employed worker earning £28,000 a year, the Class 4 reductions and Class 2 abolition combined could save them up to £650 a year.
However, for profits exceeding £50,270, the additional rate for Class 4 NICs will remain at 2%.
NIC liability for lower profits
Those in self-employment earning less than £50,270 a year can expect the following reductions in their liability for National Insurance contributions this year:
| Profit | 2024–2025 NICs | Reduction |
| £15,000 | £146 | £232 |
| £25,000 | £746 | £552 |
| £35,000 | £1,346 | £852 |
| £45,000 | £1,946 | £1,152 |
However, we can’t consider NICs in isolation – as other tax threshold freezes mean that the savings from NIC reductions are unlikely to be enough to offset fiscal drag.
Frozen tax thresholds
As the Personal Allowance and Income Tax thresholds have been frozen at 2021 levels, and will stay frozen for several more years, this is likely to push more people over the thresholds as their earnings increase, resulting in a changing tax status with greater tax liability.
That said, freezing the Class 4 NIC main rate threshold at £50,270 is still beneficial for self-employed earners. For example, if this was increased to £60,000, a self-employed individual would have to pay 6% instead of the 2% additional rate on an extra £9,730 in profits.
Learn more by reading the 2024 Budget fact sheet and the fiscal drag research briefing from the House of Commons. We can expect the next Budget between September and November.
If you need help managing your self-employed accounts and taxes, why not enlist professional help from our accountants in Barnsley? You can reach the gbac team by calling 01226 298 298 or emailing info@gbac.co.uk to find out how to optimise your self-employed tax liabilities.