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Budget 2018: National Insurance Contributions changes

David McManus

David McManus | Tax Advisory and Compliance Service

Friday 30th Nov, 2018

The changes in the Budget to National Insurance Contributions (NICs) will have an effect on both the self-employed and higher rate earners, lessening the impact of the announced personal allowance and higher rate tax threshold increases.

From April 2019, the lower earnings limit for Class 1 NIC will increase from £116 in 2018/19 to £118 per week for 2019/20. The primary and secondary threshold will change from £162 to £166 per week, and the upper earnings limit will change from £892 to £962 per week.

Currently those earning £46,350 or more pay 12% up to that level and 2% on all earnings above it. When the changes are put into action they will pay 12% up to £50,000 and 2% above this.

Therefore even though the personal allowance is increasing to £12,500 and the higher rate threshold to £50,000, the NIC increase will reduce this benefit. As an example, someone earning £50,000 will have a liability of £860 less than the 2018-19 tax year. This will however be mitigated by a £333 increase in their NICs liabilities, leaving them only £526 better-off.

Class 1 NICs: Employee and employer rates and thresholds (£ per week)

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