§ Employees and Employers
§ The class 1 employee contribution rate—not contracted out—is increased from 7.75 per cent. to 8.75 per cent. 0.25 per cent. of this increase is on account of the reduction in the Treasury supplement, 0.1 per cent for the NHS, 0.35 per cent. for the redundancy fund and 0.3 per cent. to keep the national insurance fund in broad balance. The same increases are being made in the employee contracted-out rate. The reduced contribution payable by opted-out married women and widows is increased from 2.75 per cent. to 3.2 per cent. There will be no increase in the contribution rate for employers, which will continue at 10 per cent., not contracted-out, plus 0.2 per cent. for the redundancy and maternity pay funds and 3.5 per cent. national insurance surcharge, although employers' contributions will be affected by the new upper earnings limit.
These contributions are payable on all earnings up to an upper limit provided that the earnings reach a lower limit. In line with the requirements of the Social Security Pensions Act 1975, the lower earnings limit will be increased to £29.50 a week, just below the new basic retirement pension, and the upper earnings limit will be increased to £220 a week. The present limits are £27 and £200 a week respectively.
§ The Self-employed
§ The flat-rate class 2 contribution will be raised from £3.40 a week to £3.75 a week. This increase is accounted for entirely by inflation, in particular the movement of earnings and benefit rates. I have thought it right not to make additions to the class 2 rate for the NHS allocation or to compensate for the reduction in the Treasury supplement. In reaching this decision, I have suspended for this year the application of the formula for calculating the class 2 contribution which has been used since 1978. I do so in recognition of the important role which the self-employed, and in particular small businesses, must play in the regeneration of our economy: the need to keep to a minimum the burdens of the self-employed—especially those with lower profits, who may have a class 2 liability only—has therefore been foremost in my mind.
| TABLE SHOWING IMPACT OF PROPOSED CHANGES ON INDIVIDUAL LIABILITY | ||||
| A. —Not-contracted-out | ||||
| Weekly earnings £ | 1981–82 weekly contribution £ | Changes on account of inflation* £ | Increases on account of the NI Fund and changes in NHS and EP allocation and Treasury Supplement £ | 1982–83 weekly contribution £ |
| Employed Earner | ||||
| 27.00 | 2.09 | -2.09 | — | Nil |
| 29.50 | 2.29 | — | +0.29 | 2.58 |
| 60.00 | 4.65 | — | +0.60 | 5.25 |
| 100.00 | 7.75 | — | +1.00 | 8.75 |
| 150.00† | 11.62 | — | +1.50 | 13.12 |
| 200.00 | 15.50 | — | +2.00 | 17.50 |
| 220.00 | 15.50 | + 1.55 | +2.20 | 19.25 |
| Employer‡ | ||||
| 27.00 | 3.70 | -3.70 | — | Nil |
§ The annual limit of earnings below which a self-employed person may apply for exemption from liability for class 2 contribution will be raised from £1,475 to £1, 600.
The weekly class 2 contribution rate for share fishermen, who are eligible for unemployment benefit, will go up from £5.15 a week to £5.85.
The rate of class 4 contributions payable on profits will be increased from 5.75 per cent. to 6 per cent. —0.1 per cent. for the NHS, 0.15 per cent. on account of the reduced Treasury supplement—and the limits of annual profits between which class 4 contributions are paid will be raised from £3,150 and £10,000 to £3,450 and £11,000. The new class 4 rates also represent a slight modification of the usual formula for calculating self-employed contributions, which would have given a rate of 6.1 per cent. I felt, however, that it was right to shield the self-employed from the full effects of the reduction in the Treasury supplement.
§ Voluntary contributions
§ The rate of the class 3 (voluntary) contributions will be increased from £3.30 to £3.65 a week.
§ Effect of all the changes
§ The tables set out the changes and their implications, distinguishing between those due to inflation and the extra increases now proposed. For those with earnings or profits between the lower and upper limits, class 1 or class 4 contributions will rise automatically with earnings or profits. Inflation increases will therefore affect only the flat-rate contributions and class 1 and class 4 contributions on earnings and profits above the old upper limits.
§ For someone earning £150 a week—about the average for men for September 1981—and not contracted out, the class 1 contribution would rise by £1.50 a week. For the self-employed person with profits of this amount—£7,800—the combined class 2 and class 4 contribution would rise by 23p a week. The maximum increase in the total class 1 contribution—employer and employee jointly—would be £6.49 a week, of which the employer would pay £2.74 on account of inflation. The employee would pay £1.55 for inflation and £2.20 because of the increase in the rate. For the self-employed, the maximum increase would be £1.49 a week, 77p due to the higher profits limit and 72p due to the increase in rates.
261| Weekly earnings £ | 1981–82 weekly contribution £ | changes on account of inflation* £ | Increases on account of the NI Fund and changes in NHS and EP allocation and Treasury Supplement £ | 1982–83 weekly contribution £ |
| 29.50 | 4.04 | — | — | 4.04 |
| 60.00 | 8.22 | — | — | 8.22 |
| 100.00 | 13.70 | — | — | 13.70 |
| 150.00† | 20.55 | — | — | 20.55 |
| 200.00 | 27.40 | — | — | 27.40 |
| 220.00 | 27.40 | +2.74 | — | 30.14 |
| Total Class 1 | ||||
| 27.00 | 5.79 | -5.79 | — | Nil |
| 29.50 | 6.33 | — | +0.29 | 6.62 |
| 60.00 | 12.87 | — | +0.60 | 13.47 |
| 100.00 | 21.45 | — | +1.00 | 22.45 |
| 150.00† | 32.17 | — | + 1.50 | 33.67 |
| 200.00 | 42.90 | — | + 2.00 | 44.90 |
| 220.00 | 42.90 | +4.29 | + 2.20 | 49.39 |
| * ie changes in lower and upper earnings limits. | ||||
| † Approximate average weekly earnings of all full-time males at September 1981. | ||||
| ‡ Includes national insurance surcharge (3.5 per cent.) and Redundancy and Maternity Pay Fund allocation (0.2 per cent.). |
| Table Showing Impact of Proposed Changes on Individual Liability | ||||
| B. Contracted-out | ||||
| Weekly earnings | 1981–82 Weekly earnings contribution | Changes on account of inflation† | Increases on account of the NI Fund and changes in NHS & EP allocation and Treasury Supplement | 1982–83 weekly contribution |
| £ | £ | £ | £ | £ |
| Employed Earner | ||||
| 27.00 | 2.09 | -2.09 | — | Nil |
| 29.50 | 2.22 | +0.07 | +0.29 | 2.58 |
| 60.00 | 3.82 | +0.07 | +0.60 | 4.49 |
| 100.00 | 5.92 | +0.07 | + 1.00 | 6.99 |
| 150.00‡ | 8.55 | +0.07 | + 1.50 | 10.11 |
| 200.00 | 11.17 | +0.07 | + 2.00 | 13.24 |
| 220.00 | 11.17 | +1.12 | +2.20 | 14.49 |
| Employer* | ||||
| 27.00 | 3.70 | -3.70 | — | Nil |
| 29.50 | 3.93 | +0.11 | — | 4.04 |
| 60.00 | 6.74 | +0.11 | — | 6.85 |
| 100.00 | 10.42 | +0.11 | — | 10.53 |
| 150.00‡ | 15.02 | +0.11 | — | 15.13 |
| 200.00 | 19.62 | +0.11 | — | 19.73 |
| 220.00 | 19.62 | + 1.95 | — | 21.57 |
| Total Class 1 | ||||
| 27.00 | 5.79 | -5.79 | — | Nil |
| 29.50 | 6.15 | +0.18 | +0.29 | 6.62 |
| 60.00 | 10.56 | +0.18 | +0.60 | 11.34 |
| 100.00 | 16.34 | +0.18 | +1.00 | 17.52 |
| 150.00‡ | 23.57 | +0.18 | +1.50 | 25.24 |
| 200.00 | 30.79 | +0.18 | +2.00 | 32.97 |
| 220.00 | 30.79 | +3.07 | +2.20 | 36.06 |
| † i.e. changes in lower and upper earnings limits. | ||||
| * Includes national insurance surcharge (3.5 per cent.) and Redundancy and Maternity Pay Fund allocation (0.2 per cent.) | ||||
| ‡ Approximate average weekly earnings of all full-time males. |
| Table Showing Impact of Proposed Changes on Individual Liability C. Reduced Employee Rate—Payable by Opted-out Married Women and Widows (3.2%) | ||||
| Weekly Earnings £ | 1981–82 weekly contribution £ | Changes on account of inflation† £ | Increases on account of the NI Fund and changes in NHS & EP allocations and Treasury Supplement £ | 1982–83 weekly contribution £ |
| 27.00 | 0.74 | -0.74 | — | Nil |
| 29.50 | 0.81 | — | 0.13 | 0.94 |
| 60.00 | 1.65 | — | 0.27 | 1.92 |
| 100.00‡ | 2.75 | — | 0.45 | 3.20 |
| Weekly Earnings £ | 1981–82 weekly contribution £ | Changes on account of inflation† £ | Increases on account of the NI Fund and changes in NHS & EP allocations and Treasury Supplement £ | 1982–83 weekly contribution £ |
| 150.00 | 4.12 | — | 0.68 | 4.80 |
| 200.00 | 5.50 | — | 0.90 | 6.40 |
| 220.00 | 5.50 | 0.55 | 0.99 | 7.04 |
| Employers contributions are the same as shown in tables A and B. | ||||
| † i.e. changes in lower and upper earnings limits. | ||||
| ‡ Approximate average weekly earnings of all full-time females. |
| D. Table showing impact of proposed changes on the annual liability of the self-employed | ||||
| Annual Profits or Gains £ | 1981–82 £ | Changes on account of inflation £ | Increases on account of change in NHS allocation and Treasury Supplement £ | 1982–83 £ |
| 1,475 | 176.80 | -176.80 | — | Nil |
| 1,600 | 176.80 | + 18.20 | — | 195 |
| 3,150 | 176.80 | +18.20 | — | 195 |
| Changes in Contribution Rates Proposed for 1982–83 | ||||
| 1981–82 | Changes on account of inflation* £ | Increases on account of the National Insurance Fund changes in NHS and EP allocations and Treasury Supplement per cent. | 1982–83 | |
| Class 1 rate | ||||
| Lower Earnings Limit (LEL) | £27 a week | 2.50 | £29.50 | |
| Upper Earnings limit (UEL) | £200 a week | 20.00 | £220.00 | |
| Employed earner's rate: | ||||
| Not contracted-out | 7.75 per cent. | 1 | 8.75 per cent. | |
| Contracted-out | 7.75 per cent. to LEL | 1 | 8.75 per cent. to LEL | |
| 5.25 per cent. between LEL and UEL | 1 | 6.25 per cent. between LEL and UEL | ||
| Reduced rate | 2.75 per cent. | 0.45 | 3.2 per cent. | |
| Employer's rate* | ||||
| Not contracted-out | 13.7 per cent. | — | — | 13.7 per cent. |
| Contracted-out | 9.2 per cent. | — | — | 9.2 per cent. |
| Class 2 rate | £3.40 a week | £0.35 | 0.25 | £3.75 |
| Small earnings exception—where earnings | ||||
| below | £1,475 a year | 125.00 | — | £1,600 |
| Class 4 rate | 5.75 per cent. | — | 6 per cent. | |
| Lower limit of profits or gains | £3,150 a year | 300.00 | — | £3,450 |
| Upper limit of profits or gains | £10,000 a year | 1,000.00 | — | £11,000 |
| Class 3 rate | £3.30 a week | 0.35 | £3.65 | |
| * In particular, the movements in earnings and benefit rates. | ||||
| † Inclusive of National Insurance Surcharge (3.5 per cent.) payable under the National Insurance Surcharge Act 1976 as amended by the Finance Act 1978 and Redundancy and Maternity Pay Fund allocation (0.2 per cent.) |
| Annual Profits or Gains £ | 1981–82 £ | Changes on account of inflation £ | Increases on account of change in NHS allocation and Treasury Supplement £ | 1982–83 £ |
| 3,450 | 194.05 | +18.20 | — | 195 |
| 5,000 | 283.17 | +0.95 | 3.88 | 288 |
| 7,800 | 444.17 | +0.95 | 10.88 | 456 |
| 10,000 | 570.67 | +0.95 | 16.38 | 588 |
| 11,000 | 570.67 | +58.45 | 18.88 | 648 |
| TOTAL PAYMENTS IN 1982–83 BY EMPLOYERS AND EMPLOYEES IN NATIONAL INSURANCE CONTRIBUTIONS AND NATIONAL INSUREANCE SURCHARGE | ||||||
| £ million | ||||||
| National Insurance Contributions | NI Surcharge | |||||
| Employees | Employers | Total Employees + Employers | Employers | Total Employees + Employers Contributions + NIS | Total Employers Contributions + NIS | |
| Contributions in 1981–82* | 6,756 | 9,011 | 15,767 | 3,791 | 19,558 | 12,802 |
| 1981–83 increase from increased earnings etc,† | 542 | 512 | 1,054 | 225 | 1,279 | 737 |
| Sub-total | 7,298 | 9,523 | 16,821 | 4,016 | 20,837 | 13,539 |
| 1982–83 increase from changes in earnings limits | 105 | 140 | 245 | 47 | 292 | 187 |
| 1982–83 increase from increased rates (l%)‡ | 992 | — | 992 | — | 992 | — |
| Total contributions in 1982–83 | 8,395 | 9,663 | 18,058 | 4,063 | 22,121 | 13,726 |
| Total increase in 1982–83 | 1,639 | 652 | 2,291 | 272 | 2,563 | 924 |
| * Including NHS and, for employers, redundancy and maternity funds. | ||||||
| † Includes population and employment changes and delayed effects of April 1981 changes. | ||||||
| ‡ These result from class 1 contributions. A further £20 million should be added for class 2, 3 and 4 contributions (self-employed and voluntary) to give the total of £1,012 as the increase in income attributable to the change in rates. |
§ Note: To reconcile this table with Appendix 1 in the Government Actuary's Report, sum the increases below the first sub-total, including the £20 million in third footnote.