National Insurance – Budget Report 16 March 2016

National Insurance Contributions (NICs)

2016/17 Employee
Class 1
Payable on weekly earnings of:
    Below £112 (lower earnings limit) Nil
    £112 – £155 (primary threshold) *0%
    Up to £156 (secondary threshold) Nil
    Above £156 13.8%
    £155.01 – £827 (upper earnings limit) **12%
    £156.01 – £827 (upper secondary threshold (UST) for
under 21s)
12% 0%
    £156.01 – £827 (apprentice upper secondary threshold
(AUST) for under 25s)
12% 0%
    Above £827 **2%
*No NICs are actually payable but a notional Class 1 NIC is deemed to have been paid; this protects contributory benefit entitlement.
**Over state pension age, the employee contribution is generally nil.
Employment Allowance Up to £3,000 (per year)
Class 1A On relevant benefits 13.8%
Class 2 Self employed £2.80 per week
Small profits threshold £5,965 per annum
Class 3 Voluntary £14.10 per week
Class 3A Voluntary contributions may be available to 5 April 2017 in order to obtain extra additional State Pension (maximum £25 a week) – variable contribution rates according to age
Class 4 Self employed on annual profits
£8,060 – £43,000 *9%
Excess over £43,000 *2%
*Exemption applies if state pension age was reached by 6 April 2016.

Changes to the Employment Allowance

From April 2016 the annual Employment Allowance for employer NICs increases from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance.

Future changes

It was announced that from April 2018, Class 2 NICs will be abolished, and a reform of Class 4 NICs will be undertaken.

Termination payments

From April 2018, employer NICs will be due on termination payments above £30,000 that are already subject to income tax.

The first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs.