Chancellor’s cut to employee National Insurance Contributions (NIC)

Commenting on the Chancellor’s cut to employee National Insurance Contributions (NIC), Susan Waites, Partner, Hymans Robertson, said:

“The widely trailed 2% reduction in employee National Insurance Contributions (NICs) announced in the Spring Budget will provide a welcome boost to take home pay from April. An individual earning £35k will be £448 a year better off. It does however further erode the savings an employee makes by sacrificing pay for pension contributions, which cuts across Government intentions and industry efforts to incentivise employees to pay much more into their workplace pensions.”

Hymans Robertson has calculated that, for a basic rate taxpayer per £100 sacrificed into pension:

• before last NIC cut – cost to employee £68 (NIC saving is £12)
• after NIC cut to 10% – cost to employee £70 (NIC saving is £10)
• after NIC cut to 8% – cost to employee £72 (NIC saving is £8).

“Employer NIC saving on pay sacrificed throughout is £13.80. Some employers choose to pay some or all of their NIC saving into employees’ pensions. In light of the widening gap between the amount of NIC saved by employers and their employees, we would encourage employers that don’t currently share their NIC savings to consider doing so.

“NIC savings on other popular employee benefits like cycle to work, electric cars and tech schemes will also reduce. So for employees making use of multiple salary sacrifice schemes, the latest cut in NICs may not boost their take home pay by as much as they expect.”