Overview

This bill aims to reduce National Insurance contributions (NICs) for both employees and the self-employed, and to abolish Class 2 NICs altogether. These changes are intended to stimulate the economy and benefit individuals and businesses.

Description

The bill makes several key changes to National Insurance Contributions:

• Class 1 NICs (Employees): The main primary rate for Class 1 NICs will be reduced from 12% to 10%, effective January 6th, 2024. A transitional rate of 11.5% will apply to directors for the 2023-24 tax year. Further adjustments are made to the annual maximum contributions.
• Class 4 NICs (Self-Employed): The main Class 4 NICs rate will fall from 9% to 8%, effective April 6th, 2024. Again, adjustments to annual maximum contributions are made.
• Class 2 NICs (Self-Employed): The requirement to pay Class 2 NICs will be completely removed, effective April 6th, 2024.

The bill includes a schedule detailing transitional provisions to manage the changes smoothly and ensure a fair calculation of NICs during the transition periods.

Government Spending

The bill will reduce government revenue from National Insurance contributions. The exact figure is not specified in the provided text but will likely be significant given the widespread nature of the changes.

Groups Affected

The bill will affect several groups:

• Employees: Will benefit from a lower rate of Class 1 NICs, leading to higher take-home pay.
• Self-Employed Individuals: Will benefit from both a lower rate of Class 4 NICs and the complete abolition of Class 2 NICs, resulting in increased profits.
• Businesses: Will likely see a reduction in their overall NICs liability.
• Government: Will experience a decrease in NIC revenue.

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