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March 18th, 2024
By Faith McNamara

Spring 2024 Budget: National Insurance Cuts & What You Should Know as a Parent

The childcare arena is about to experience a revolutionary change and this is very exciting news for families with nannies. From April 6, 2024, the UK government has been targeting a National Insurance contribution reduction of both primary Class 1 and Class 4, which will upwardly impact your Nanny and enhance the overall quality of care for your children. This is the second change to the National Insurance rate this year.

In this article, the Little Ones Payroll Service will present the various benefits that come with the possible changes that might be encountered by both your family and your employee.

Primary Class 1 National Insurance Contributions

From the 6th of April 2024, your Nanny will enjoy a 2-percentage decrease in the primary rate of Class I National Insurance contributions, moving down from 10% to 8%. This reduction not only comes as a relief to the Nanny but also highlights the important role that they play in your family.

Class 1 National Insurance Contributions NICs are based on employment earnings subject to PAYE (Pay As You Earn), meaning that they are not mandatory for any self-employed persons or the income they earn. They consist of amounts that are deducted from your employee’s wages - as their primary contribution.

By lessening the burden of NI contributions, your Nanny will have more disposable income, increased job satisfaction and benefit from a general improvement in their well-being.

Class 4 National Insurance Contributions

What follows this will be the 2% proportional cut in the additional primary Class 1 and the main rate for Class 4 National Insurance contributions which will be set at 6%. That process continues to pursue the savings announced in the Autumn Statement 2023 resulting in a progressive decrease from 9% to 6%.

Class 4 National Insurance Contributions (NICs) are taxes that self-employed individuals in the UK must pay on their profits if they earn £12,570 or more per year.

There have been a number of changes to national insurance rates. In January 2024, the rate that employees pay was reduced from 12% to 10% on earnings between £12,570 and £50,270. From April this year, it will be further cut to 8%.

With these significant benefits levelling the playing field, individuals may be encouraged to take charge of their health and develop their own life and career plans, which will lead to an improved family-Nanny relationship.

How will the national insurance cuts affect my employee’s pay?

Here is an example of the changes a full-time Nanny working in London should expect to see. In the fiscal year 2023-24, if they were earning the UK's median wage of £38,000, they would be expected to pay £5,086 annually in income tax and £2,924 in national insurance, meaning their monthly take-home pay amounted to £2,499 monthly, or £29,990 annually.

In the fiscal year 2024-25, the Nanny receives a £2,500 pay rise from their employer. While their tax bill increases by £500 to £5,586, their National Insurance Contributions (NICs) decrease due to the announced 2p cut, saving them £559. With an additional £559 from the fresh cut, their total savings amount to £1,118. Consequently, the monthly take-home pay rises to £2,723 monthly, or £32,680 annually. This results in a £224 improvement in monthly income.

For an accurate breakdown of your Nanny’s monthly income and the changes that may incur after the 6th of April, contact a Little Ones Payroll Administrator. They can tell you what changes you should expect to see on your employee’s payslip.

Implications for Your Employee

These changes do not stop at just the digits. They directly influence the quality of life and work prospects you can enjoy with your Nanny. National Insurance contributions have been reduced, empowering the Nanny to live a more financially stable and flexible life, with enough freedom to pursue personal and professional goals in the future.

Although it may include contributing to education growth, getting health coverage, or planning retirement, these cuts allow your staff member to have control and prioritise well-being and their long-term goals.

To learn more about how the National Insurance cuts affect your Nanny and their expenditures, talk to a Little Ones Payroll Administrator, who would be happy to discuss the details.

Supporting Your Employee's Growth

As an employer, you play an integral part in the development of employees' growth and career.. The reduced rate in National Insurance contributions allows you to begin discussing your nanny’s financial security and allows you to support them.

This is the time you should allow your Nanny to engage in an open discussion about their career aspirations, professional growth and development opportunities, and possible ways you can help their progress within the family.

Enhancing Your Family's Experience

Not only will your Nanny benefit directly from this reduction, but it also leads to an improved homecare experience for your family. Nanny placement agencies can offer various services to families and Nannies to facilitate the hiring process and ensure the best possible match based on the family's needs and the Nanny's qualifications

Through the removal of financial strains, your Nanny is free to be entirely invested in the growth and development of your children. For you and your loved ones, the Nanny is the most crucial element in childcare, helping you create your daily experience and supporting you in the most critical moments in your children’s lives.

For even more financial relief, we recommend signing up for the Little Ones Payroll Service.  The first three months are complimentary when you hire through Little Ones. With unparalleled knowledge and experience in domestic staff salaries and HMRC tax obligations, our premium service ensures financial peace of mind.

The reduction in National Insurance contributions for primary Class 1 and Class 4 heralds a new era of empowerment and opportunity for your dedicated Nanny. As you navigate the evolving childcare landscape, seize this moment to reaffirm your commitment to supporting your employee's growth, well-being, and professional aspirations.

Together, let's celebrate the invaluable contributions of your Nanny and continue fostering a nurturing and supportive environment within your home.

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