National Insurance Contributions
Thresholds and rates (Table D)
From 6 April 2017, the National Insurance Contributions (NIC) thresholds for employers and employees are to be made consistent at £157 per week (from £155 for employees, £156 for employers). Failing to increase the employers’ threshold by the usual amount will increase the amount payable, but unifying the amounts should simplify administration.
The Upper Earnings Limit will also increase to £45,000 in line with the threshold for 40% Income Tax. This means that a further £2,000 of salary will be subject to 12% employee’s NIC rather than 2%, and a further £2,000 of self employed profits will be subject to 9% Class 4 NIC rather than 2%. These increases (£200 and £140) offset the reduction in Income Tax from raising the threshold.
Class 2 NIC is to be abolished from April 2018. A self employed person’s entitlement to State pension will in future depend on payment of Class 4 (profit based) or Class 3 (voluntary).
The Chancellor noted that the new pension rules provide the same benefits to self employed people and employees. In his view, this makes unfair the much higher NIC charges on employees (where employee and employer both pay, at main rates of 12% and 13.8%) compared to those paid by self employed people (where Class 4 is charged at a main rate of 9%). For this reason, the main rate of Class 4, which applies between the lower threshold and the upper earnings limit, will increase from 9% to 10% in April 2018 and to 11% in April 2019. This will lead to an increase of about £370 in each year for someone earning above the upper earnings limit, but the NIC charge will still be much lower than for employees.
From April 2018, the Government will remove NIC from the effects of the Limitation Act 1980. This will align the time limits and recovery process for enforcing NIC debts with other taxes, and appears to be related to measures to collect tax on loans made in the past to beneficiaries of employee benefit trusts.