The national insurance upper earnings limit will be reduced to keep it aligned with the income tax higher-rate threshold. Exact figures will be confirmed in the autumn.
Based on current Retail Prices Index (RPI) forecasts the basic rate limit will be reduced by £2,500 and the higher rate threshold by £1,650 below the amount the previous Labour government put in place.
These changes will mean higher rate-taxpayers will not benefit from this measure.
The plans inherited from the previous Labour government for nationalinsurance rates to increase by 1 per cent in April 2011 will be †largely reversed by increasing the threshold for employer National Insurance Contributions (NICs) by £21 a week above indexation.
As a result, the number of employees for whom employers pay no NICs will rise by 650,000. This will benefit a number of sectors, including manufacturing.
Clive Fathers, tax partner at Grant Thornton estimated that all staff earning above roughly £20,000 a year will be affected by the increase in national insurance next April. Therefore employers should relook at using salary sacrifice options around benefits.
He said: “All but the lowest paid will be affected [by the increase in NI], so anything employers can do that helps employees is a good thing.”
To help fund increases in the personal allowance, and ensure that those on higher incomes pay their fair share, the basic rate limit for income tax will be frozen in 2013-14.
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