
# Untangling the 2023 and 2024 budgets' National Insurance changes

Listening to the budget speeches by the Chancellor, reading some newspapers, consulting online calculators and 
listening to excellent sources like Martin Lewis might be confusing. They all have different numbers on how much
it may save on income tax. This article aims to untangle the confusion.

## What is changing?

The straightforward explanation is between January 2024 and April 2024, the employee National Insurance (NI) rate drops by 4% 
from 12% to 8% in two stages. Of course, the devil is in the details and that is where the confusion and disagreeing numbers start. 
The first cut of 2% came into effect in January 2024 and the second cut of 2% will come into effect in April 2024.

## How much will You save?

You will save 4% on income between £12,570 and £50,270. So for every £1,000 in that bracket, you will save £40.
For example, if you earn £32,570 you will save £400 for the January 2024 cut and £400 for the April 2024 cut for
a total of £800 or `£20,000 x 0.02 x 2`. The NI taxation of income below £12,570 and above £50,270 will not change.

## Why the confusion?

### 1. Outdated calculators

Most online calculators are updated once a year with the tax rates and thresholds and are stuck on the 2023/24 rates, i.e.
12% NI rate. We have made the choice to annualise the change, i.e. our [personal tax calculator](/personal-tax) 
and [rates comparison](/tax-rates) uses a blended NI rate of 11.5% for the 2023/24 tax year. If your income did not change in the 2023/24 tax year
this will give the same answer as calculating it month by month with the January change. 
Otherwise, the exact calculation will be more complex, and this will only be an approximation.

### 2. Different frames of reference

Some sources compare the 2023/24 12% starting rate with the 2024/25 8% rate, and some use the intermediate 2023/24 10% rate.
And to make matters worse, most sources use different incomes to calculate the savings, which of course makes them
not directly comparable.

## Summary

The 2023 and 2024 budgets' National Insurance changes are confusing. The 12% rate drops to 8% in two stages.
The confusion comes from outdated calculators and different frames of reference. 
The savings are 4% on income between £12,570 and £50,270.


With Tax Shrink, you can calculate your [personal tax and savings](/personal-tax) or 
[optimise your salary to dividend ratio](/optimise-salary-dividend) to maximise your net income from your Limited company.


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Untangling the 2023 and 2024 budgets' National Insurance changes