These regulations make specific amendments to the existing National Insurance Contributions (NICs) framework relevant to the 2024/25 tax year, primarily revising the rates and thresholds for Class 2 and Class 4 contributions payable by the self-employed.
Key changes include reducing the main rate of Class 4 NICs, setting new thresholds for when Class 2 contributions are payable, and effectively abolishing mandatory Class 2 payments for those whose profits meet or exceed a specified lower profits limit.
Arguments For
The regulations implement the reduction in the main rate of Class 4 National Insurance contributions announced for the 2024/25 tax year, providing immediate financial relief to self-employed individuals.
Aligning the primary threshold for Class 2 contributions with the lower profits limit for Class 4 contributions ensures a simpler and more coherent structure for self-employed tax obligations.
Introducing new thresholds for the abolition of Class 2 contributions simplifies the system by removing the requirement for many self-employed people to pay Class 2 NICs, especially those with profits above the primary threshold.
Arguments Against
Changes to contribution rates and thresholds can create administrative complexity for payroll software providers and HMRC during implementation, especially if the changes take effect mid-year.
Adjustments to National Insurance contribution rates can affect workforce planning and employer costs, although these specific regulations primarily target the self-employed.
Altering the structure of Class 2 and Class 4 contributions may impact the future entitlement calculation for State Pension and other contributory benefits for those affected by the changes.
STATUTORY INSTRUMENTS 2024 No. 212 NATIONAL INSURANCE CONTRIBUTIONS The National Insurance Contributions (Amendment No. 10) Regulations 2024
Made 1st February 2024 Coming into force 6th April 2024
This document is officially classified as a Statutory Instrument numbered 2024 No. 212, indicating it is a form of secondary legislation made under the authority of an Act of Parliament.
The subject matter is National Insurance Contributions, and the regulations officially came into force on April 6th, 2024.
The Secretary of State for Work and Pensions makes the following Regulations under sections 121(1) and 122(1) of the Social Security Contributions and Benefits Act 1992(a) and section 11(2) of the Social Security Act 1986(b).
The Secretary of State for Work and Pensions created these rules using powers granted by the Social Security Contributions and Benefits Act 1992 and the Social Security Act 1986.
These Acts provide the legal foundation required to introduce or change National Insurance contribution rules.
- These Regulations amend the National Insurance Contributions Regulations 1975(c) and the Social Security (Contributions) Regulations 2001(d).
The instrument specifically modifies two existing sets of rules: the National Insurance Contributions Regulations 1975 and the Social Security (Contributions) Regulations 2001.
This action updates the primary legislation governing how contributions are calculated and paid.
3.—(1) In regulation 1(2) of the National Insurance Contributions Regulations 1975, in the definition of “Class 2 primary threshold” for the year 2024/25, for “£12,570” substitute “£12,300”.
This paragraph amends the 'Class 2 primary threshold' for the 2024/25 tax year within the 1975 Regulations.
The set value is changed: the threshold is lowered from £12,570 to £12,300.
4.—(1) Regulation 100(2) of the Social Security (Contributions) Regulations 2001 is amended as follows.
(2) For the table in paragraph (2), substitute the following table:
“Table
Profits for a year in respect of which Class 4 contributions are payable Rate of Class 4 contributions
(a) Profits do not exceed the lower profits limit Nil
(b) Profits exceed the lower profits limit but do not exceed the upper profits limit 6 per cent.
(c) Profits exceed the upper profits limit 2 per cent.”
This regulation replaces the contribution rate table for Class 4 contributions within the 2001 Regulations.
The updated table shows that if self-employed profits are below the lower profits limit, the Class 4 contribution rate is zero (Nil).
For profits between the lower and upper limits, the rate is 6 percent.
For profits exceeding the upper limit, the rate drops significantly to 2 percent.
5.—(1) Regulation 101(1) of the Social Security (Contributions) Regulations 2001 is amended as follows.
(2) For paragraph (1)(a), substitute “where the profits for the year are less than the primary threshold referred to in regulation 122(1) of these Regulations, that the person shall be deemed to have been liable to pay Class 2 contributions at a rate of £3.45 a week.”.
This change affects Class 2 contributions for those whose annual profits fall below the specified primary threshold.
If profits are below this level, the individual is deemed liable to pay Class 2 contributions, but at a specified weekly rate of £3.45.
6.—(1) Regulation 122(1) of the Social Security (Contributions) Regulations 2001 is amended as follows.
(2) In the definition of “lower profits limit” for the year 2024/25, for “£12,570” substitute “£12,300”.
This paragraph updates the 'lower profits limit' definition for the 2024/25 tax year within the 2001 Regulations.
The monetary value used for this specific limit is substituted, changing the threshold from £12,570 to £12,300.
(3) In the definition of “primary threshold” for the year 2024/25, for “£12,570” substitute “£12,300”.
This further amendment defines the 'primary threshold' for 2024/25, changing the value from £12,570 to £12,300.
This threshold is critical for determining liability for certain contribution types.
- After regulation 122A of the Social Security (Contributions) Regulations 2001 insert the following regulation—
“122B.—(1) Subject to paragraph (2), a person whose profits for a year are equal to or more than the lower profits limit but less than the primary threshold shall be treated as if they had complied with the requirements of section 11(4) of the Social Security Act 1986 for the purpose of determining Class 2 contributions.
(2) Regulations made under section 11(4) of the Social Security Act 1986 shall not apply to a person to whom paragraph (1) applies.”
A new regulation, 122B, is inserted to address individuals whose profits fall between the 'lower profits limit' and the 'primary threshold'.
For this group, they are treated as having met the necessary requirements related to Class 2 contributions, which effectively exempts them from standard Class 2 payment procedures under Section 11(4) of the 1986 Act.
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