Budget Summary 2011 Introduction Income Tax Tax Credits and Benefits National Insurance Employees Savings and Investment Capital Gains Tax Inheritance Tax Corporation Tax Business Tax Value Added Tax Stamp Duty Land Tax Other Measures Income Tax Rates and Allowances National Insurance Contributions

National Insurance Contributions Rates and limits (Table D) Several important changes to NIC were announced in advance and will take effect on 6 April 2011. The rates of NIC will all increase by one percentage point. From the individual's point of view, this is equivalent to an increase of 1% in the rate of tax: salaries will be charged at 12% and 2% instead of 11% and 1%, and self-employed profits will be charged at 9% and 2% instead of 8% and 1%. Employers will have to pay 13.8% instead of 12.8% on salaries and benefits, in addition to the higher employees' NIC. There is also a reduction in the upper earnings limit, the point at which the rate falls from 12% to 2%. This will now match the level at which 40% tax starts (although savings income, which is not charged to NIC, will normally prevent the thresholds matching exactly). For lower earners, the increase in the rate is offset by an increase in the level at which contributions start. Employee contributions will not be charged on the first £139 per week (up from £110). Employer contributions will not be charged on the first £136 per week (the two thresholds were the same in 2010/11). The annual salary at which employee NIC will be higher in 2011/12 is about £23,820, but someone on £100,000 will pay substantially more (£5,380 instead of £4,760).Class 1A NIC are charged on taxable benefits, and are due from the employer on 19 July following the tax year to which they relate. As the rate will have gone up by July 2011, the Class 1A NIC for 2010/11 will be levied at 13.8%, even though they relate to a year in which the rate was 12.8%. Contracting-out rebate The rebate of NIC enjoyed by employers and employees, where the employee is a member of a pension scheme which allows "contracting out" of the State second pension, is set to reduce from April 2012. The employer's rebate will reduce from 3.7% to 3.4% and the employee's rebate will reduce from 1.6% to 1.4%. These are deducted from the normal NIC rates which will be 13.8% (employer) and 12% (employee) in 2011/12. Holiday for new businesses In June 2010 Mr Osborne announced a "holiday" from paying up to £5,000 of employer's NIC for new businesses in respect of their first 10 employees for a year. In his response to the Budget speech, Mr Miliband claimed that this has only helped 1,500 businesses so far, rather than the much larger number that Mr Osborne hoped for. However, no measures were announced to extend or relax the scheme to encourage greater take-up. Merging NIC and income tax? The Chancellor announced a consultation to examine ways in which the "operation" of the parallel but different regimes for income tax and NIC could be "integrated". He said that there is no intention to extend the NIC charge to savings or pensions income, or to end the contributory principle whereby the NIC record determines entitlement to benefits. It will therefore be extremely difficult to design a system which is genuinely simpler than the current one, while retaining some of the key aspects which make it complicated. Mr Osborne acknowledged that it could take several years to achieve the change.