In this Budget the cut in the employer's NI rate from 12.2% to 11.9% from April 2001, announced in the November 1999 Pre-Budget Report, has been confirmed. A further reduction of 0.1% to 11.8% from April 2002 has been proposed.
In the last Budget the Chancellor announced substantial changes to National Insurance to take effect from April 2000 and April 2001. As a reminder, these are indicated below.
As part of the move to align the levels of income above which income tax and NICs are due, from April 2000 the threshold above which employee's NICs are payable is increased to £76 per week, with full alignment with the level of the personal allowance from 6 April 2001.
As a consequence of the increase in the employee's NIC payment threshold, the upper earnings limit increases to £535 per week from April 2000.
As far as employers are concerned, from April 2000 employer's Class 1A NICs have been extended to cover benefits in kind which are taxed, such as private medical insurance, and not just cars and car fuel as at present. Employees will not pay NICs on benefits in kind. This has diminished the attraction of benefits in kind for the employer.
Also, as mentioned earlier, from April 2001 the employer's NI rate will be cut from 12.2% to 11.9%, and to 11.8% from April 2002.
(c) The self-employed:
Alignment of contributions by the self-employed with those of employees begins from April 2000. From this date, the lower limit on profits for Class 4 contribution purposes is reduced to the level of the personal tax allowance of £4,385, and the upper limit on profits, (£27,820 per annum from 6 April 2000), continues to reflect the employee's Class 1 upper earnings limit. In addition, the rate of Class 4 contributions rises from 6% to 7% from April 2000.
The Class 2 flat-rate contribution reduces from April 2000 to £2 per week, and becomes due when profits exceed £3,825 per annum.