HC Deb 24 July 1985 vol 83 cc608-10W
Mr. Meacher

asked the Secretary of State for Social Services if he will set out in a table the national insurance contributions liability of (a) contracted-in employees through class 1, (b) contracted-out employees through class 1, (c) self-employed people through class 2 contributions and (d) self-employed people through class 4 contributions in 1985–86 and showing for employees and the self-employed the total amount due in the year and the weekly equivalent and showing separately and in the total the effects of the tax relief available on class 4 contributions, assuming their income is at the following constant levels throughout the year: £35.50 per week, £55.00 per week, £59.00 per week, £89.00 per week, £90.00 per week, £130.00 per week, £146.00 and £265.00 per week, respectively, and £1,925 per year and £4,150 per year, respectively: 0.5, 0.75, 1.0, 1.5 and 2.0 times average earnings and at a level of income to pay income tax at 40 per cent., 45 per cent., 50 per cent., 55 per cent. and 60 per cent., respectively.

Mr. Whitney

The information requested is in the table.

Contracted-in Class 1 Contracted-out Class 1 Class 2 (see note 4) Class 4
Earnings Rate Weekly Annual 1985–86 Rate Weekly Annual 1985–86 Weekly Annual 1985–86 Weekly Annual 1985–86 (Tax relief see note 1)
£ £ £ £ £ £ £ £ £ £
1,925 per annum R1 3.33 134.68 R4 3.29 132.60 4.75 214.50 Nil Nil Nil
R2 1.85 R5 1.81 3.50
4,150 per annum R1 7.18 332.02 R4 6.22 282.10 4.75 214.50 Nil Nil Nil
R3 5.59 R5 4.63 3.50
0.5xaverage earnings Rl 7.74 357.76 R4 6.65 301.08 4.75 214.50 3.90 20.29 3.04
86 per week (see note 2) R3 6.02 R5 4.93 3.50
0.75 x average earnings Rl 11.61 603.72 R4 9.59 498.68 4.75 214.50 3.10 161.15 24.17
129 per week 3.50
Average earnings R1 15.48 804.96 R4 12.54 652.08 4.75 214.50 5.81 302.02 45.30
172 per week 3.50
1.5X average earnings R1 23.22 1,207.44 R4 18.43 958.36 4.75 214.50 11.23 583.76 87.56
258 per week 3.50
2.0xaverage earnings R1 23.85 1,240.20 R4 18.91 983.32 4.75 214.50 11.67 606.69 91.00
344 per week 3.50
Tax at 40 per cent.
18,406 (single person) pa R1 23.85 1,240.20 R4 18.91 983.32 4.75 214.50 11.67 606.69 91.10
19,656 (married man) pa 3.50
Tax at 45 per cent.
21,406 (single person) pa R1 23.85 1,240.20 R4 18.90 983.32 4.75 214.50 11.67 606.69 121.39
22,656 (married man) pa 3.50
Tax at 50 per cent.
26,606 (single person) pa R1 23.85 1,240.20 R4 18.90 983.32 4.75 214.50 11.67 606.69 136.55
27,856 (married man) pa 3.50
Tax at 55 per cent.
34,506 (single person) pa R1 23.85 1,240.20 R4 18.90 983.32 4.75 214.50 11.67 606.69 151.72
35,756 (married man) pa 3.50
Tax at 60 per cent.
42,406 (single person) pa R1 23.85 1,240.20 R4 18.90 983.32 4.75 214.50 11.67 606.69 166.89
43,656 (married man) pa 3.50

Notes:

1. This is the amount gained in tax relief on half the class 4 contribution.

2. Average earnings have been taken from the Department of Employment's provisional earnings figures for April 1985 in respect of all employees in all occupations.

3. The rates quoted are:

R1 =9.00 per cent.

R2*=5.00 per cent.

R3*=7.00 per cent.

R4 =9.00 per cent. of £35.50 plus 6.85 per cent. of earnings over £35.50.

R5*=7.00 per cent. of £35.50 plus 4.85 per cent. of earnings over £35.50 if earnings are between £35.50 and £89.99.

R6*=5.00 per cent. of £35.50 plus 2.85 per cent. of earnings over £35.50 if earnings are between £35.50 and £54.99.

* Payable from 6 October 1985.

4. The class 2 rate of £3.50 is payable from 6 October 1985. The figures assume that those with earnings below £1,925 claim small earnings exemption.

Mr. Meacher

asked the Secretary of State for Social Services if he will list the differences between the benefits received by a person who pays contracted-out class 1 national insurance as an employee and one who pays class 2 and 4 national insurance as self-employed; and if he will show that part of the contribution that pays for each of the extra benefits received in each case.

Mr. Whitney

The following list sets out the contributory benefits paid in return for class 1 contributions to people satisfying the necessary conditions:

  • Unemployment benefit
  • Sickness benefit
  • Invalidity benefit
  • Maternity allowance
  • Retirement pension
  • Widow's allowance
  • Widowed mother's allowance
  • Widow's pension
  • Child's special allowance
  • Death grant

People paying self-employed contributions do not receive unemployment benefit, an additional component to retirement pension and invalidity benefit, or industrial injuries benefits.

There is no simple relation between specific parts of the contribution and particular benefits. Cmnd. 7036 described the formula for calculating the self-employed contribution rates, and these rates were last reviewed according to this formula for 1983–84. Deductions were made from the joint class 1 rate of 19.45 per cent. amounting to 1.9 per cent. inrespect of short term benefits for which the self-employed are not eligible and 14.2 per cent. on earnings over the lower earnings limit in respect of earnings related pensions. The class 2 and 4 rates were then chosen so as to produce the same revenue as this notional class 1 rate would have raised from the self-employed. The class 2 rate has been uprated in line with changes in the basic pension but abatements from the actuarial rate have been in force as a concession. This abatement will rise to £1.75 per week following the introduction of proposals in the 1985 Budget.