At the Autumn Statement last year, the Chancellor announced changes to National Insurance Contribution (NIC) rates for employees and the self-employed. Unusually, the change for employees has taken place during the tax year, meaning that employers need to check that their payroll software is up to date before running their January payrolls.

From 6 January 2024, the Class 1 main rate of NIC (paid by employees on earnings between £12,570 and £50,270) reduced from 12% to 10%. This represents a tax saving of £38 a month for an employee earning the average wage of £35,400.

Although software providers only had six weeks to deal with the change, most are expected to have updated their software in time. HMRC’s Basic PAYE tool was also updated ahead of the 6 January change.

Where an employer’s software provider has been unable to make the necessary changes in time, the employer will need to charge the incorrect Class 1 National Insurance rate and then correct it later. In their December 2023 Agent Update HMRC say that employers should follow normal guidance on correcting payroll errors.

The Class 1 secondary NIC rate of 13.8%, which is paid by employers, is unchanged - as is the 2% rate paid by employees on earnings over £50,270.

This article reflects the position at the date of publication (16 January 2024). If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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