Sarah Bradford analyses the changes announced to national insurance for employers, employees, the self-employed and for termination payments.
Employers and employees
National Insurance rates and threshold have been set for 2018/19. The lower earnings limit for Class 1 National Insurance purposes will increase to £116 per week, the primary and secondary thresholds to £162 per week and the upper earnings limit, upper secondary threshold and apprentice upper secondary threshold to £892 per week.
The main primary rate of class 1 remains at 12%, the additional rate is set at 2% and the secondary rate at 13.8%. Class 1A and Class 1B NIC are also unchanged at 13.8%. The Employment Allowance remains at £3,000.
As announced on 2 November 2017, the National Insurance Contributions Bill has been delayed and will be introduced to Parliament in 2018. As a result, the reforms to the National Insurance regime for the self-employed, which involve the abolition of Class 2 and the reform of Class 4 so as to provide the mechanism by which the self-employed build up entitlement to the state pension and certain contributory benefits, are delayed by one year until April 2019.
Consequently, for 2018/19 the self-employed will pay Class 2 contributions at £2.95 per week on profits in excess of the small profits threshold of £6,205. They will also pay Class 4 contributions at 9% on profits between £8,424 and £46,350, and at 2% on profits in excess of £46,350. Self-employed earners with profits below £6,205 can pay Class 2 contributions voluntarily in order to maintain their contributions record.
The rate of Class 3 (voluntary) contributions is increased to £14.65 per week from 6 April 2018.
The delay to the National Insurance Contributions Bill also means that the extension of Class 1A National Insurance to termination payments not taxed as earnings in excess of £30,000 will be delayed to April 2019. In addition, the imposition of PAYE and NIC on income from non-contractual, non-customary sporting testimonials in excess of £100,000 will take effect from 6 April 2019 rather than 6 April 2018.