Budget 2018: Small changes for National Insurance

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Sarah Bradford reviews the changes announced for national insurance and the employment allowance in the Budget.

No change for self employed

As announced on 6 September 2018, the planned abolition of Class 2 National Insurance contributions and the associated reforms to Class 4, which were due to take effect from 6 April 2019, will not now go ahead.  

For 2019/20, the self employed will continue to pay Class 2 and Class 4. Class 2 contributions are set at £3.00 per week where profits exceed the small profits threshold of £6,365, Self-employed earners with profits below this level can pay Class 2 voluntarily.

Class 4 contributions are payable at the main rate of 9% on profits between the lower profits limit, set at £8,632 for 2019/20 and the upper profits level, set at £50,000 for 2019/20, and at the additional rate of 2% on profits in excess of £50,000.

Class 1A

The government still intends to proceed with the two remaining measures which were included in the draft National Insurance Contributions Bill:

  • the introduction of a Class 1A (employer-only) charge on termination payments in excess of £30,000; and
  • the introduction of a Class 1A (employer-only) charge on sporting testimonials in excess of the £100,000 exemption.

Both of these measures will now take effect from April 2020.

Employment allowance

Changes are to be introduced to restrict access to the National Insurance Employment Allowance to smaller businesses. This allowance allows employers to reduce the amount of employer’s Class 1 National Insurance which they pay over to HMRC by up to £3,000 per year. From 2020/21, the Employment Allowance will only be available to employers with a National Insurance bill in the previous tax year of £100,000 or less.

Class 1 rates and thresholds

As far as the class 1 NIC rates and thresholds are concerned, the lower earnings limit will increase to £118 per week for 2019/20, the primary and secondary threshold to £166 per week and the upper earnings limit to £962 per week. The upper secondary threshold for under 21s and the apprentice upper secondary threshold, both of which are aligned with the upper earnings limit, also rise to £962 per week.

The employment allowance remains at £3,000 for 2019/20. Also unchanged are the main primary rate of Class 1 contributions at 12%, the additional primary rate at 2% and the secondary Class 1 rate at 13.8%. Class 1A and Class 1B employer-only rates also remain at 13.8%.

Voluntary class 3

For 2019/20, the rate of voluntary Class 3 contributions is set at £15.00 per week.

 

Need a handy summary of all the major measures from Budget 2018? Visit our at a glance guide.

About Sarah Bradford

Sarah Bradford

Sarah Bradford BA (Hons) ACA CTA (Fellow) is the director of Writetax Ltd (www.writetax.co.uk) and its sister company, Writetax Consultancy Services Ltd. She writes widely on tax and National Insurance contributions and is the author of National Insurance Contributions 2015/16 published by Bloomsbury Professional. She can be contacted at [email protected]

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30th Oct 2018 08:38

Subject to the wording of the legislation, the changes to Employment Allowance would appear to prevent a first year claim for new employers, since they would have no NI bill in the previous year.

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