Aligning the primary and secondary National Insurance contributons thresholds
Published 5 December 2016
© Crown copyright 2016
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Who is likely to be affected
Employers who are liable to pay Class 1 secondary (employer) National Insurance contributions (NICs) on earnings above the secondary threshold.
General description of the measure
This measure aligns the primary (employee) threshold and the secondary (employer) threshold. From April 2017, both the primary and secondary thresholds will be £157 per week, having been raised from £155 and £156 per week respectively for 2016 to 2017.
Policy objective
As recommended by the Office of Tax Simplification, the government has decided to align the primary and secondary thresholds. Alignment will mean that employers no longer have to be mindful of two separate thresholds when understanding at what level of earnings NICs begins to be paid.
Background to the measure
This measure was announced at Autumn Statement 2016.
Detailed proposal
Operative date
This measure will have effect for primary and secondary Class 1 NICs accruing on or after 6 April 2017.
Current law
Current law which provides for the earnings limits and thresholds for primary and secondary Class 1 NICs is contained in section 5 of the Social Security and Contributions Act 1992. Equivalent provision for Northern Ireland is contained in the Social Security Contributions and Benefits (Northern Ireland) Act 1992. Section 5 provides that the limits and thresholds shall be specified for every tax year by way of regulations. The limits and thresholds for the tax year 2016 to 2017 are set out in regulations 10 and 11 of the Social Security (Contributions) Regulations 2001 (‘the 2001 Regulations’).
Proposed revisions
Regulations will be made amending regulation 10 and 11 of The 2001 Regulations aligning the secondary threshold to the primary threshold. Both thresholds will be set at £157 per week. The amendments will have effect from 6 April 2017.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|---|
| - | +170 | +145 | +145 | +145 | +145 |
These figures are set out in table 2.1 of Autumn Statement 2016 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2016.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The measure is not expected to impact on individuals and households or family formation, stability or breakdown.
Equalities impacts
The alignment of primary and secondary thresholds is not expected to have a disproportionate impact on any income groups. There is a small impact on employers, and as such, the government does not expect any impact on groups protected under the Equality Act.
Impact on business including civil society organisations
This measure is expected to have a positive impact on administrative burdens for employers. Around 1.4 million employers will no longer have to consider two separate thresholds when deciding at what earnings level NICs begin to be paid. Employers will also have to pay NICs on a slightly larger band of earnings than would have been the case if the primary and secondary thresholds had not been aligned. The maximum additional cost is relatively small at 13.8 pence per week for an employee earning over £157 per week.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
There will be no operational impact to HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, please contact Oliver Mathers on email: oliver.mathers@hmrc.gsi.gov.uk.