§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)My right honourable friend the Paymaster General has made the following Written Ministerial Statement.
I have completed the annual review under Section 141 of the Social Security Administration Act 1992. I propose the following changes to take effect from 6 April 2005. These rates and limits will also apply to national insurance contributions in Northern Ireland.
Employers and Employees
In line with the Social Security Contributions and Benefits Act 1992, the lower earnings limit for primary class 1 contributions is to be raised to £82 a week. It is set at the level of the basic state pension for a single person from April 2005 and rounded down to the nearest pound.
The primary and secondary thresholds for class 1 contributions will continue to be aligned with the weekly amount of the income tax personal allowance, which will be increased to £4,895 from April 2005. The primary and secondary thresholds will therefore be increased to £94 a week. This means that no tax or class 1 contributions will actually be paid on earnings below this level. The upper earnings limit for primary class 1 contributions will be raised to £630.
The self-employed
The rate of class 2 contributions will be raised to £2.10 a week. Self-employed people with earnings below the annual small earnings exception can apply to be exempted from paying class 2 contributions. This limit will be raised by £130 to £4,345 in line with inflation. The annual lower profits limit for liability to class 4 contributions will increase to £4,895 a year (in line with the income tax personal allowance). The upper profits limit will increase by £1,040 to £32,760, to maintain the link with employees' earnings liable to Class 1 contributions.
37WSClass 3
The rate of Class 3 voluntary contributions will be increased by 20p to £7.35 a week.
Share, fishermen
The special rate of class 2 contributions for share fishermen, which allows them to build entitlement to contributory jobseeker's allowance in addition to the other contributory benefits available to the self-employed, will be increased to £2.75 a week.
Volunteer Development Workers
The special rate of class 2 contributions for volunteer development workers, which entitles them to the full range of contributory benefits, will be increased by 15p to £4.10 in line with the statutory formula of 5 per cent of the primary class 1 lower earnings limit.
Treasury Grant
I need to ensure that the fund can maintain a prudent working balance throughout the coming year. In accordance with Section 2(2) of the Social Security Act 1993, I propose to do so by prescribing that the maximum Treasury grant which may be made available to the fund in 2005–06 shall not exceed 2 per cent of the estimated benefit expenditure for that year. Similar provision will be made in respect of the Northern Ireland National Insurance Fund. I shall be laying a draft re-rating order before Parliament in due course. This will accompany a report by the Government Actuary to myself and my right honourable friend the Secretary of State for Work and Pensions which we shall jointly present to Parliament.
The following table sets out the rates, earnings limits and thresholds for national insurance contributions proposed for 2005–06.
National insurance contributions, proposed re-rating, April 2005:
38WS
Item 2005–06 Lower earnings limit, primary class 1 £82 Upper earnings limit, primary class 1 £630 Primary threshold £94 Secondary threshold £94 Employees' primary class 1 rate 11 per cent from £94.01 to £630 plus 1 per cent above £630 Employees' contracted-out rebate 1.6 per cent Married women's reduced rate 4.85 per cent from £94.01 to £630 plus 1 per cent above £630 Employers' secondary class 1 rate 12.8 per cent on earnings above £94 Employers' contracted-out rebate, salary-related schemes 3.5 per cent Employers' contracted-out rebate, money-purchase schemes 1.0 per cent Class 2 rate £2.10
Item 2005–06 Class 2 small earnings exception £4,345 Special class 2 rate for share fishermen £2.75 Special class 2 rate for volunteer development workers £4.10 Class 3 rate £7.35 Class 4 rate 8 per cent from £4,895 to £32,760 plus 1 per cent above £32,760 Class 4 lower profits limit £4,895 Class 4 upper profits limit £32,760