Budget Report

2016/17                                                    Employee (Primary)     Employer (Secondary)


Class 1
Payable on weekly earnings of
Below £112 (lower earnings limit)                      Nil                                           -
£112 to £155 (primary threshold)                     *0%                                         -
Below £156 (secondary threshold)                      -                                           Nil
Above £156                                                                -                                         13.8%
£155.01 - £827 (upper earnings limit)           **12%                                         -
£156.01 - £827 (UST) for under 21s)                  12%                                        0%
£156.01 - £827 (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.