§ Employees and Employers
§ The class 1 employee contribution rate—not contracted out—is increased from 6.75 per cent. to 7.75 per cent. 0.5 per cent. of this increase is on account of the reduction in the Treasury supplement, 0.25 per cent. for the NHS, and 0.25 per cent to avoid a deficit in the national insurance fund. 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 per cent to 2.75 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.
§ 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 £27 a week, just below the new basic retirement pension, and the upper earnings limit will be increased to £200 a week. The present limits are £23 and £165 a week respectively.
§ The self-employed
§ The flat-rate class 2 contribution is raised from £2.50 a week to £3.40 a week; 45p of this increase reflects inflation, in particular the movement in earnings and benefit rates, 15p is for the NHS, and 30p is on account of the reduced Treasury supplement. The annual limit of 49W earnings below which a self-employed person may apply for exception from liability for class 2 contributions is raised from £1,250 to £1,475.
§ The weekly class 2 contribution rate for share fishermen — who are eligible for unemployment benefit — is increased from £3.90 a week to £5.15 a week
§ The rate of class 4 contributions payable in respect of profits is increased from 5 per cent. to 5.75 per cent—0.25 per cent for the NHS, 0.5 per cent on account of the reduced Treasury supplement—and the limits of annual Profits between which class 4 contributions are paid are raised from £2,650 and £8,300 to £3,150 and £10,000.
§ Voluntary contributions
§ The rate of the class 3 (voluntary) contributions is increased from £2.40 to £3.30 a week.
§ Effect of all the changes
§ The table below sets out all the changes, distinguishing those due to inflation and the extra increases now proposed. For those with earnings or profits between the
| CHANGES IN CONTRIBUTION RATES PROPOSED FOR 1981–82 | ||||
| 1980–81 | Changes on account of inflation* | Increases on account of the national insurance fund, changes in NHS allocation and Treasury supplement | 1981–82 | |
| Class 1 | ||||
| Lower earnings limit (LEL) | £23 a week | £4 | — | £27 a week |
| Upper earnings limit (UEL) | £165 a week | £35 | — | £200 a week |
| Employed earner's rate: | ||||
| Not contracted out | 6.75 per cent. | — | 1 per cent. | 7.75 per cent. |
| Contracted out | 6.75 per cent, to LEL | — | 1 per cent. | 7.75 per cent. to LEL |
| Reduced rate | 4.25 per cent, between LEL and UEL | — | 1 per cent. | 5.25 per cent. between LEL and UEL |
| Employer's rate:† | 2 per cent. | — | 0.75 per cent. | 2.75 per cent |
| Not contracted out | 13.7 per cent. | — | — | No change |
| Contracted out | 13.7 percent to LEL | — | — | No change |
| 9.2 per cent, between | — | — | No change | |
| LEL and UEL | ||||
| Class 2 rate | £2.50 a week | 45p | 45p | £3.40 a week |
| Small earnings exception— | ||||
| Where earnings below | £1,250 a year | £225 | — | £1,475 a year |
| Class 4 rate | 5 per cent | — | 0.75 per cent | 5.75 per cent. |
| Lower limit of profits or gains | £2,650 a year | £500 | — | £3,150 a year |
| Upper limit of profits or gains | £8,300 a year | £1,700 | — | £10,000 a year |
| Class 3 rate | £2.40 a week | 45p | 45p | £3.30 a week |
| * In particular, the movements in earnings and benefit rates. | ||||
| † Inclusive of 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. |