business & tax

National Insurance Contribution Rates (NIC) 2009/2010 and 2010/2011

2010/11 Rates Frozen - Slight Band Increase.  In 2011/201 most rates will increase by 1%.

National Insurance Contributions give us an entitlement to state benefits.  It funds our state pension but also a second tier state pension called the State Second Pension. To receive credit towards this you must earn above a certain threshold.

What You Receive:

State second pensions credit is earned when you earn over:

Lower Earnings Limit (LEL) -  £95 per week (£97 per week 2010/2011) - the minimum level of earnings needed at which an employee will qualify for a year credited towards State Second Pension (S2P) for that year. 

This is also the lower level of earnings which will be used in determining any national insurance rebate.

Upper Earnings Limit (UEL) - £844 per week, £43,888 per annum (unchanged for 2010/2011) - the level on which an employee's SERPS and State Second Pension (S2P) entitlement is based (and the NI rebate).

When Do You Pay:

Just to complicate things, there is a totally different set of thesholds upon which contributions are paid.  There are two because sometimes the rates and thesholds change for employers and employees.

Employees Earnings Threshold (EE/ET) - £110 per week, £5,720 pa (unchanged for 2010/2011) - the level of earnings at which employees start to pay Class 1 National Insurance contributions.

Employers Earnings Threshold (ER/ET) - £110 per week, £5,720 pa (unchanged for 2010/2011)  - the level of employees earnings at which an employer starts to pay Class 1 National Insurance contributions.

What Do You Pay?

Employed National Insurance Rates:

Employee Payment Rates

• Weekly Earnings - £1 to £110 Rate = Nil
• Weekly Earnings - £110.01 to £844 Rate = 11% (increases to 12% wef 2011/2012)
  
• Weekly Earnings - Excess over £844 Rate = 1% (increases to 2% wef 2011/2012)

Employer Rates For Employee Pay

• Weekly Earnings - £1 to £110 Rate = Nil
• Weekly Earnings - Excess over £110 Rate = 12.8% (increases to 13.8% wef 2011/2012)

Employer Rates for Employees Co. Car Private Fuel (see Company Cars Fuel) = 12.8% (increases to 13.8% wef 2011/2012)

Self Employed National Insurance Rates:

Class 2 Contributions

• Annual Earnings over £5,075 - Flat Rate = £2.40 per week

Class 4 Contributions

• On Annual Profits - £5,715 - £43,875 - Rate = 8% (increases to 9% wef 2011/2012)
  
• On Annual Profits Excess over £43,875 - Rate = 1% (increases to 2% wef 2011/2012)