The Spring Budget, delivered by Chancellor Jeremy Hunt on March 6, 2024, outlined the government’s plans for tax reform and public spending. This explainer focuses on two key changes relevant to employers and employees: National Insurance contributions (NICs) and the High Income Child Benefit Charge.
Lower National Insurance Contributions (NICs)
The government announced a reduction in NICs, a tax paid by both employers and employees that contributes to national insurance programs. Here’s what you need to know:
- Reduced Employee NICs: The main rate of Class 1 NICs paid by employees will decrease from 10% to 8%, effective from April 6, 2024.
- Lower Tax for Self-Employed: The main rate of Class 4 NICs for self-employed individuals will be further reduced from 9% to 6%, starting April 6, 2024. This builds upon a previous reduction announced in the Autumn Statement.
What Employers Need to Do:
Employers should begin working with their payroll software provider and IT partners (if applicable) to implement the changes to Class 1 employee NICs by April 6, 2024. HMRC (Her Majesty’s Revenue and Customs) will update their Basic PAYE Tools to reflect this change.
Modification to the High Income Child Benefit Charge
The High Income Child Benefit Charge applies to higher-income earners claiming Child Benefit. The Spring Budget introduced the following modifications:
- Increased Threshold: The income threshold at which the charge starts applying will rise from £50,000 to £60,000 per year, effective April 6, 2024.
- Tapered System: The charge will be gradually introduced (tapered) for those earning between £60,000 and £80,000. Essentially, the more you earn above £60,000, the higher the charge becomes.
What Employees Should Know:
Employees who haven’t previously claimed Child Benefit or may have opted out can now reconsider claiming. Due to the tapered system, claiming Child Benefit might still be financially beneficial even with an income between £60,000 and £80,000.
Claiming Child Benefit:
- Claims can be made easily through the HMRC app or online.
- Backdated claims are possible for up to 3 months or the child’s birth date (whichever is later).
Click here below learn more overview of tax legislation and rates (OOTLAR)
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Conclusion
The Spring Budget 2024 outlines the government’s commitment to supporting working people, investing in public services, and stimulating economic growth. By understanding its key points and implications, you can better navigate the changes and opportunities it presents. Stay informed, stay engaged, and make the most of the opportunities available to you.