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HMRC internal manual

National Insurance Manual

Class 1 structural overview from 6 April 2003 to 5 April 2009: structural changes: effect on entitlement to contributory benefits

The removal of the Upper Earnings Limit for the purposes of calculating the amount of primary Class 1 NICs due has no effect on a contributor’s entitlement to claim contributory benefits, with the exception of the Additional state pension.

As part of the changes to the structure of Class 1 NICs, the National Insurance Contributions Act 2002 ensured that entitlement to contributory benefit continues to be calculated on earnings but only on those earnings:

  • that attract a Class 1 NICs liability at the main primary percentage. That is, on earnings between the Primary Threshold and the Upper Earnings Limit or
  • on which Class 1 NICs are treated as paid. That is on earnings at or above the Lower Earnings Limit but at or below the Primary Threshold.

Earnings above the Upper Earnings Limit, on which the additional primary percentage is paid, do not give rise to contributory benefit entitlement.

The main amendments conferring benefit entitlement were made to Schedule 3 of SSCBA 1992, which deals with contribution conditions for entitlement to benefit. Most confined the earnings on which benefit is based to those earnings that do not exceed the Upper Earnings Limit or on which the main primary percentage is paid.

All enquiries about the qualifying conditions for contributory benefit should be referred to the Department for Work and Pensions. Contributors who ask about the effect of Class 1 liability on their entitlement to contributory benefit can be advised that earnings above the Upper Earnings Limit do not count towards benefit entitlement.

Background information on the changes introduced by the National Insurance Contributions Act 2002 can be found at NIM01102.