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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Credit unions

A credit union is a financial co-operative. They were traditionally owned and run by members who have a common interest, such as where they live or work; but these days, some have broader membership rules.

Credit union returns

Other than PrizeSaver accounts (discussed below), returns on credit union savings may be by way of a ‘dividend’ or interest.

Both types are treated as savings income for tax purposes despite the first being called a ‘dividend’.

Credit unions do not have to deduct any tax at source from savings income. Credit union savings income falls within the personal savings allowance.

PrizeSaver accounts

From October 2019, some credit unions have been offering a ‘win while you save’ account known as a PrizeSaver account. It is possible to win up to £5,000 a month by saving from just £1 a month into these accounts. HMRC have confirmed to us that the winnings paid in these accounts are not treated as taxable income and can therefore be ignored for income tax purposes.

However, please note the winnings will be treated as capital for universal credit and your universal credit award would be affected if your total capital exceeds £6,000. If you are in receipt of tax credits or benefits, you should check with HMRC or the Department for Work and Pensions as appropriate to confirm how any prize is treated for that specific benefit.

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