Overview

This bill increases the thresholds at which National Insurance Contributions (NICs) become payable for different classes of contributors. This means more people will pay less or no NICs, providing tax relief for lower and middle earners.

Description

The bill amends existing legislation to raise the thresholds for various categories of NICs. Specifically:

• Primary Class 1 contributions: The primary threshold (the earnings level below which NICs are not payable for employed individuals) increases from £190 to £242 per week (£1,048 per month; £12,570 per year). These changes take effect from July 6th, 2022.
• Class 4 contributions: The lower limit of profits for self-employed individuals subject to Class 4 NICs increases from £9,880 to £11,908 (retroactively from April 6th, 2022) and then further to £12,570 (from April 6th, 2023).
• Class 2 contributions: The Treasury will create regulations to ensure the Class 2 threshold (for self-employed individuals) is equivalent to the Class 4 threshold. These regulations may also include provisions to treat individuals with profits below the Class 2 threshold as making Class 2 contributions under certain circumstances. This allows for alignment of Class 2 and Class 4 contribution thresholds.
• Transitional provisions: The bill includes transitional measures for the 2022-2023 tax year to manage the change in thresholds, adjusting the annual maximum for Class 1 contributions for those with multiple employments and making specific modifications for directors’ earnings.

Government Spending

The bill is expected to reduce government revenue from NICs. Exact figures are not explicitly stated in the provided text. The reduction will result from fewer individuals being subject to NICs or paying lower amounts.

Groups Affected

The bill primarily affects:

• Employed individuals: Those earning below the increased primary Class 1 threshold will pay less or no NICs.
• Self-employed individuals: Those with profits below the increased Class 4 and Class 2 thresholds will pay less or no NICs.
• The UK Government: Will receive less revenue from NICs.

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