Budget 2007

National Insurance Contributions

Rates and limits

The percentage rates of NIC remain unchanged. There are small increases in the thresholds and also in the flat rate weekly payments under Classes 2 and 3.

The most striking change is a significant increase in the upper limit at which employee contributions drop from 11% to 1% and self-employed contributions drop from 8% to 1%. It was announced last year that this upper limit is to be aligned with the higher rate income tax threshold, probably in 2009/10. The increase widens the 11% band from £29,615 to £34,605: someone with high earnings will pay £499 extra on salary or £350 extra on self-employed profits as a result in 2008/09.

Rates and limits for 2008/09

Class 1	Weekly	Monthly	Yearly
Primary Threshold - employees	£105	£453	£5,435
Upper Earnings Limit - employees	£770	£3,337	£40,040
Secondary Threshold - employers	£105	£453	£5,435

Employer's Contribution	Contracted In	Contracted Out
		Salary Related Scheme	Money Purchase Scheme
On earnings up to threshold	Nil	Nil	Nil
On earnings between threshold and upper earnings limit	12.8%	9.1%	11.4%
On earnings above upper earnings limit	12.8%	12.8%	12.8%

Employee's Contribution

Contracted in: 11% on earnings between lower and upper limits, 1% above upper limit.
Contracted Out: 9.4% on earnings between lower and upper limits, 1% above upper limit.

Earnings over £90 per week qualify for benefit, and must be reported under PAYE, but no NICs are payable until earnings exceed £105 per week.

The reduced Class 1 rate payable by certain married women and widows is 4.85% for earnings between £105 and £770 per week, 1% above £770 per week.

Class 2 (Self-employed)	Earnings over £4,825 per year	£2.30 per week
Class 3 (Voluntary)	No limit applicable	£8.10 per week
Class 4 (Self-employed)	Profits between £5,435 and £40,040	8%
	Profits above £40,040	1%