Speech

Queen's Speech: National Insurance Contributions Bill

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Notes on: "Changes to National Insurance will save jobs and support the economy."

The purpose of the Bill

  • Increase rates of National Insurance Contributions (NICs) from April 2011 and possibly make further changes that promote enterprise and fairness.
  • Further changes that may, or may not, be included are based on the following commitments made by the Coalition:- ”We will make it easier for people to set up new enterprises” and
    - ”We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals.”

The main benefits of the Bill

  • To raise £9 billion, which would finance an increase in the income tax personal allowance and an increase in the NICs threshold;
  • Under the full changes, most people would be better off relative to the previous Government’s plan, and relative to no changes, all low and middle income employees would pay less tax and NICs overall;
  • Employees on the main rate earning under £20,000 would pay less NICs

The main elements of the Bill

  • Increases to the rates of NICs from 6 April 2011 - main rate of Class 1 and Class 4 National Insurance Contributions (NICs) would be increased by 1 per cent to 12 per cent and 9 per cent respectively
    • Class 1 employer rate of NICs would be increased by 1 per cent to 13.8 per cent and will also apply to Class 1A and Class 1B NICs
    • Additional rate of Class 1 and 4 NICs would be increased by 1 per cent to 2 per cent.

Existing legislation in this area

  •  The social Security Contributions and Benefits Act 1992 and the Social Security Administration Act 1992.

Devolution

NICs and HMRC are UK wide, so the Bill would extend to England, Scotland, Wales and Northern Ireland (although separate provision in the Bill will be required for Northern Ireland). The devolved administrations will be advised of the proposals.