Overview of National Insurance and Income Tax Changes in 2024-2028
National Insurance (NI) is paid by employees, employers, and the self-employed, with those over the state pension age exempt from NI payments. NI contributions affect eligibility for benefits such as the state pension, and voluntary contributions can fill gaps in records. Employees begin paying NI from age 16 if they earn more than £242 a week, while the self-employed pay NI on profits exceeding £12,570 annually.
In 2024, the starting NI rate for employees dropped twice: first from 12% to 10%, then further to 8%. For the self-employed, the NI rate on earnings between £12,570 and £50,270 decreased from 9% to 6%. Earnings above £50,270 are subject to a 2% NI rate for all workers. From April 2025, employer NI contributions will be 15% on wages above £5,000, down from 13.8% above £9,100, and the employment allowance will rise from £5,000 to £10,500.
Regarding income tax, the personal allowance remains at £12,570, with the basic rate of 20% applying to income between £12,571 and £50,270. The higher rate of 40% applies on earnings from £50,271 up to £125,140, where the personal allowance is gradually reduced by £1 for every £2 earned above £100,000 and disappears entirely above £125,140. An additional 45% tax rate applies above this income, with Scotland imposing different rates including a 45% band and a 48% top rate starting April 2024.
Thresholds for NI and the personal allowance, including the higher-rate threshold at £50,270, are frozen until 2028. Freezing or lowering these thresholds are policy options that could increase government revenue. The Institute for Fiscal Studies noted that the threshold freeze partly offsets 2024 NI cuts for certain workers. In 2024-25, the average earner may gain about £340 from these combined changes, but by 2027 the gain is projected to fall to around £140, though many income bands will continue to benefit.
