§ Mr. ClappisonTo ask the Chancellor of the Exchequer what the National Insurance Contribution liability was of a self-employed person earning(a)£20,000 and (b)£30,000 in the financial years (i) 1996–97, (ii) 1999–2000 and (iii) 2000–01; and what it will be in 2001–02. [150049]
§ Dawn Primarolo[holding answer 12 February 2001]: Since 1999, this Government have introduced a package of measures to build a fairer National Insurance system, to improve work incentives and encourage job creation. In particular, we have aimed to improve the position of lower earning self-employed people and to address the under-contribution of the self-employed as a whole to the National Insurance Fund, compared with the National Insurance contributions (NICs) payable by employees and employers.
The self-employed pay class 2 which is a weekly flat rate charge and class 4 which is charged as a percentage of profits over the lower profits limit up to the upper profits limit.
In the March 1999 Budget the Chancellor announced a reform of self-employed NICs to reduce the burden of National Insurance on the lowest earning self-employed and encourage the start up of self-employed businesses. The flat rate was reduced from £6.55 a week to £2 a week and the class 4 rate was increased from 6 per cent. to 7 per cent. The starting point for payment of Class 4 NICs has also been aligned with the income tax personal allowance. These changes were introduced following recommendations of the Taylor report.
Over the period mentioned in the question the Government have also introduced a number of measures on income tax. For example, we have introduced and extended the 10p starting rate, cut the basic rate to 22p, introduced the Working Families Tax Credit and the Children's Tax Credit, which reduce direct tax.
By October 2001 as a result of personal tax and benefit measures, UK households will be on average £590 a year better off and families with children will be £1,000 better off on average from measures introduced over the parliament as a whole.
The NICs and income tax liabilities will depend on many circumstances.
The table shows the net effect of changes to NICs and income tax for a single self-employed earner who has no children.
530W
£ Year/Income NICs Income tax Total 1996–97 10,000 503.00 1,340.40 1,843.40 20,000 1,103.00 3,740.40 4,843.40 30,000 1,322.60 6,258.00 7,580.60 1999–2000 10,000 488.80 1,107.95 1,596.75 20,000 1,088.80 3,407.95 4,496.75 30,000 1,448.80 5,707.95 7,156.75 2000–01 10,000 497.05 1,052.90 1,549.95 20,000 1,197.05 3,252.90 4,449.95 30,000 1,744.45 5,452.90 7,197.35 2001–02 10,000 486.55 976.70 1,463.25 20,000 1,186.55 3,176.70 4,363.25 30,000 1,879.55 5,376.70 7,256.25 The following table shows the net effect of changes to NICs, Family Credit, Child Benefit and Income Tax (including the abolition of the married couple's allowance and introduction of the Children's Tax Credit and Working Families Tax Credit) for a family unit which contains a single self-employed earner, who is working more than 30 hours, married and has two children under 11.
£ Year/Income NICs Family credit/Child benefit Income tax (including WFTC) Total 1996–97 10,000 503.00 2,031.91 1,071.90 -457.01 20,000 1,103.00 1,019.20 3,471.90 3,555.70 30,000 1,322.60 1,019.20 5,989.50 6,292.90 1999–2000 10,000 488.80 2,075.64 -690.28 -2,277.12 20,000 1,088.80 1,248.00 3.210.95 3,051.75 30,000 1,448.80 1,248.00 5,510.95 5,711.75 2000–01 10,000 497.05 1,300.00 -2,700.04 -3.502.99 20,000 1,197.05 1,300.00 3,215.83 3,112.88 30.000 1,744.45 1,300.00 5,452.90 5,897.35 2001–02 10,000 486.55 1,344.20 -3,456.43 -4,314.08 20,000 1,186.55 1,344.20 2,587.64 2,429.99 30,000 1,879.55 1,344.20 4,856.70 5,392.05
§ Mr. ClappisonTo ask the Chancellor of the Exchequer (1) how many self-employed persons paid(a) only class 2 National Insurance Contributions and (b) class 2 and class 4 Contributions in 1999–2000; and what estimate he has made of the same figures for 2000–01; [144833]
(2) what the proceeds were of (a) class 2 and (b) class 4 National Insurance Contributions in (i) 1998–99 and (ii) 1999–2000; and what estimate he has made of the same figures for 2000–01. [144832]
531W
§ Dawn PrimaroloThe reform of class 2 and class 4 National Insurance Contributions (NICs) will reduce the burden on low earners and encourage business start-ups. In 1999–2000, around 0.7 million self employed are estimated to be liable to pay only class 2 and 1.8 million are estimated to be liable to pay class 2 and class 4 NICs. For 2000–01 around 0.2 million are estimated to be liable to pay only class 2 and some 2.3 million are estimated to be liable to class 2 and class 4 NICs. Theses estimates are based on the survey of personal incomes.
Estimates for class 2 and class 4 NICs receipts in 1998–99 to 2000–01 for the United Kingdom are given in the table.
£million UK NICs receipts Year Class 2 Class 4 Total 1998–99 680 960 1,640 1999–2000 730 990 1,720 2000–01 350 1,040 1,390 These estimates were provided by the Government Actuary's Department.