Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020 — House of Lords, 2020-03-03
Topic: Mixed Topics
Theodore Agnew (Conservative, Centre-right): My Lords, I shall also speak to the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2020 The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations set the national insurance contributions rates, limits and thresholds for the 2020-21 tax year. They will allow the Government to deliver on their manifesto commitment to cut national insurance contributions for 31 million hard-working people across the United Kingdom. National insurance contributions, or NICs, are social security contributions. Payment of NICs determines eligibility for the state pension and other contributory benefits. NIC receipts go towards funding the NHS and these same contributory benefits I will first outline the changes to the class 1 primary threshold and class 4 lower profits limit. The primary threshold and lower profits limit indicate the points at which employees and the self-employed start paying class 1 and class 4 NICs, respectively. These thresholds will rise from £8,632 to £9,500 per year. These changes, promised in our manifesto, underline the Government’s commitment to ensure that work pays, putting more money into the pockets of hard-working people. They will benefit around 31 million taxpayers, with a typical employee £104 a year better off compared to 2019-20. Increases to the primary threshold and lower profits limit do not impact on state pension eligibility. This is determined by the lower earnings limit for employees and payment of class 2 NICs for the self-employed The lower earnings limit will rise in line with inflation from £6,136 to £6,240 per year. The upper earnings limit, where employees start paying 2% NICs, is aligned with the higher-rate threshold. As announced at the 2018 Budget, it will be frozen and remain at £50,000 per year The self-employed pay both class 2 and class 4 NICs. The rate of class 2 NICs will rise in line with inflation from £3 a week to £3.05 a week. The small profits threshold is the point above which the self-employed must pay class 2 NICs. This will rise with inflation from £6,365 to £6,475 per year. For class 4 NICs, as already outlined, the lower profits limit will rise to £9,500. The upper profits limit is where the self-employed start paying 2% NICs. This is also aligned with the higher-rate threshold and will remain at £50,000 per year For employers, the secondary threshold determines where they start paying employer NICs. This will rise with inflation from £8,632 to £8,788 per year. The level at which employers of people aged under 21 and apprentices aged under 25 start to pay employer NICs will remain frozen at £50,000 per year. Finally, class 3 contributions allow people voluntarily to top up their national insurance record. The rate for class 3 will increase in line with inflation from £15 to £15.30 per week The regulations also make provision for a Treasury grant of up to 5% of forecasted annual benefit expenditure to be paid into the National Insurance Fund, if needed, during 2020-21. A similar provision will be made in respect of the Northern Ireland National Insurance Fund. I hope that this is a useful overview of the changes we are making to bring rates of support and contributions to the Exchequer in line with inflation. I commend to the House the draft regulations Moving on to the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations, the Government are committed to delivering a welfare system that is fair for claimants and taxpayers while providing a strong safety net for those who need it most. These regulations will ensure that tax credits, child benefit and guardian’s allowance increase in line with the consumer prices index, which had inflation at 1.7% in the year to September 2019.