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National Insurance Contributions (NICs) in 2023-24

National Insurance Contributions (NICs) in 2023-24

National Insurance Contributions (NICs) in 2023-24

On 22 November 2023, the Chancellor declared a reduction in the Employee National Insurance rate from 12% to 10%, starting 6 January 2024.

This change will be automatically updated in the Payroll Manager software.

This brief guide explains the impact of these changes on an average employee’s salary.

It does not address employer NICs, unaffected by this adjustment, nor NICs for directors.

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What are the NIC rates for 2023-2024?

For the tax year 2023-24, the National Insurance Contributions (NICs) rates and thresholds for employees are as follows:

  • Primary Threshold (PT): The threshold for starting to pay NICs is £242.00 per week for weekly paid employees and £1,048.00 per month for monthly paid employees.
  • Upper Earnings Limit (UEL): For weekly paid employees, the UEL is £967.00, and for monthly paid employees, it’s £4,189.00.
  • NIC Rates:
    • From 6 April 2023 to 5 January 2024: Employees pay NICs at a rate of 12% on earnings between the PT and UEL. Earnings above the UEL are taxed at 2%.
    • Starting from 6 January 2024, the Chancellor’s new policy will reduce the tax rate to 10% for earnings between the PT and UEL, while maintaining a 2% rate for earnings above the UEL.


Exceptions to standard NIC calculations include employees over the State Pension Age, who don’t pay employee NICs, and those with ‘deferred’ status, paying lower NICs. The GOV.UK website provides more details in the “Rates and thresholds for employers 2023 to 2024” section. Notably, the Pay Date determines NIC rates, not the work period. For example, weekly paid employees receiving pay on 5th January 2024 will be charged at 12%, while those paid on 12th January 2024 will have a 10% rate.

What Impact Does This Have on the Salary of an Average Worker?

Starting January 2024, fixed salary employees will see a major change in National Insurance Contributions (NICs).

Effective 6 January 2024, the NIC rate drops from 12% to 10%. This will reduce the NIC deduction from employees’ paychecks.

To put this into perspective, consider a standard employee with a fixed weekly salary of £500.

Under the new rates, this employee will see a reduction in their NIC payments, reflecting the lowered rate. This example serves as a clear demonstration of the impact of the NIC rate cut on an individual’s finances. Similarly, employees paid on various schedules, whether monthly, bi-weekly, or otherwise, will see comparable reductions in their NIC contributions.

The NIC rates change is part of larger fiscal reforms.

It aims to reduce workers’ financial burden and boost take-home pay. This policy will likely benefit most workers. It should increase disposable income and financial stability.

How does Payroll Manager handle the changes to the rate of NICs?

The Payroll Manager software automatically handles NIC calculations. It includes built-in NIC rules, thresholds, and rates. To ensure the software’s accuracy and compliance, it’s important to regularly update Payroll Manager as prompted by the software.  To view specific rates and thresholds in the software, choose ‘Analysis’ then ‘Tax & NIC rates’ from Payroll Manager’s main menu. Additionally, if you require a detailed NIC calculation for a specific employee, you can easily access this information.  Simply click on the ‘Click here for explanation’ button, located towards the bottom-left of the ‘Pay Details’ screen. From there, choose ‘NIC’ to view the detailed calculation.

How can I update my copy of Payroll Manager with the new rates?

The Payroll Manager will automatically notify you of available updates to implement these changes. The release of this update occurred in the first week of December 2023.

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Source:  |  Keywords: National Insurance Contributions, NIC, Rates & Thresholds for employers 2023 to 2024

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