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Employee benefits, NIC and PAYE

Budget NIC changes leave employers behind


The class 1 NIC threshold is raised for employees, but not so much for employers, leaving a gap. New exemptions are proposed and a temporary reimbursement of SSP for smaller employers.

12th Mar 2020
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As previously announced, the starting point for both primary Class 1 National Insurance contributions (NIC) and Class 4 contributions for the self-employed is increased to £9,500 for 2020/21. This represents the first step in the Government’s plan to align the point at which individuals start paying tax with the personal allowance of £12,500.

Employees and employers 

The starting point for employer’s secondary class 1 NIC is set at the lower level of £8,788 per year. As the primary and secondary NIC thresholds are no longer aligned, employer’s contributions, but not employee contributions, are due on earnings between £166 and £183 per week (£732 and £792 per month; £8,788 and £9,500 per year).

For class 1 purposes, the lower earnings limit is set at £120 per week for 2020/21, the secondary threshold at £169 per week, and the primary threshold at £183 per week. For the upper earnings limit, the upper secondary threshold for under 21s and the apprentice upper secondary threshold remains at £962 per week. The main and additional rates of class 1 contributions are also unchanged at, respectively, 12% and 2%, and the secondary rate remains at 13.8%.

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Replies (1)

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By Charlie Carne
12th Mar 2020 14:08

The Chancellor should have taken the opportunity (whilst increasing the Employment Allowance and capping it for payrolls below £100k of NI) to correct an anomaly and prevent recovery of er's NI on directors' salaries (rather than the current, daft system that only prohibits recovery of EA for payrolls where a director is the sole employee; a rule which can be easily got around by employing someone for one week in the year, paid above the primary threshold).

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