National Insurance Contributions (NI)
No changes to the rates of income based NI contributions were announced in the Budget.
Class 2 NI will remain at £2.80 per week for 2016-7.
The Chancellor announced that Class 2 NI will be abolished from 6 April 2018.
The primary and secondary thresholds (at which employees and employers, respectively, start to pay NI) will remain the same at £155 and £156 per week, respectively.
The upper earnings (or profits for the self employed) limit is £43,000 (£827 per week), aligned with the point at which 40% tax becomes payable.
Details of the rates of NI can be found here.
Abolition of employers National Insurance contributions for apprentices aged under 25
A reminder that, from 6 April 2016, every employer with apprentices under the age of 25 will no longer be required to pay Class 1 secondary National Insurance contributions (NICs) on their earnings up to the upper earning limit (UEL), for those employees.
Employer’s Employment Allowance
The employment allowance will increase from £2,000 per annum to £3,000 per annum from 6 April 2016.
It will, however, cease to be available for companies where the director is the sole employee.
A reminder that the new National Living Wage starts from 1 April 2016. This means that all workers over the age of 25 have to be paid at least £7.20 per hour.
The National Minimum Wage currently increases on 1 October every year. This will be brought into line with the Living Wage, so both rates are amended in April from 2017.
The Minimum Wage rates from 1 October 2016 will be:
- 21 to 24 year olds increased from £6.70 to £6.95 per hour
- 18 to 20 year olds increased from £5.30 to £5.55 per hour
- 16 to 17 year olds increased from £3.87 to £4.00 per hour
- apprentices increased from £3.30 to £3.40 per hour
Trivial Benefits in Kind
From 6 April 2016 there will be a statutory exemption from tax and national insurance for qualifying trivial benefits in kind (BIKs) costing £50 or less. There will be an annual cap of £300 for office holders of close companies (which would include the directors of most owner managed businesses), and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax.
Other changes to Benefits in Kind
The small earnings threshold of £8,500 that exists for benefits in kind will be abolished for employees from 6 April 2016. This means that benefits in kind must be reported, and tax and employer’s national insurance paid, for all benefits provided to employees, not just those earning over £8,500 per annum.
Note: The exemption never applied for directors, so those paying themselves the lower NI limit, which is less than £8,500, already have to report and pay tax on any benefits
National insurance on termination payments
From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due.
For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.