Overview

This bill increases the thresholds at which National Insurance Contributions (NICs) become payable for different categories of earners. This means more people will earn below the threshold and therefore won't pay NICs.

Description

The bill amends existing legislation to raise the thresholds for three classes of NICs:

• Class 1 Contributions: The primary threshold for employed individuals' NICs increases from £190 to £242 per week. Related thresholds are also increased to £1,048 (from £823) and £12,570 (from £9,880). These changes take effect from July 6th, 2022.
• Class 4 Contributions: The lower profit limit for self-employed individuals' NICs increases from £9,880 to £11,908 (effective April 6th, 2022), and further to £12,570 (effective April 6th, 2023).
• Class 2 Contributions: The bill mandates the Treasury to introduce regulations aligning the Class 2 contribution threshold (for the self-employed) with the Class 4 threshold. Retrospective application from April 6th, 2022, is permitted.

The bill also includes transitional provisions to manage the changes and allows for further regulations to address consequential matters.

Government Spending

The bill is expected to reduce government revenue from NICs. Precise figures are not provided in the bill text itself, but the changes will lead to a decrease in the overall amount collected.

Groups Affected

The bill primarily affects:

• Employed Individuals: Lower-income workers will see a reduction or elimination of their Class 1 NICs liability.
• Self-Employed Individuals: Lower-income self-employed individuals will see a reduction or elimination of their Class 2 and Class 4 NICs liability.
• The UK Government: Will experience a decrease in tax revenue.

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