Pre-Budget Report: National Insurance Contributions

The Chancellor announced that the NI rates for the 2010/11 tax year will be unchanged from those announced in last year’s Pre-Budget Report.

He has announced new rates for 2011/12, adding a further 0.5% to the rates announced in last year’s Pre-Budget Report for that year. From 2011/12, the main rate of Class 1 and 4 NICs will be 12% and 9% respectively. The employer's contribution also rises by a further 0.5% to 13.8% The increased rate will also apply to Class 1A and 1B contributions.

Comment:

Whilst recognising that unemployment will continue to rise, the Chancellor still saw fit to increase what is in fact a payroll tax – albeit that 2011/12 is still some 16 months away. It adds a burden to all employers, large and small. It may be partly due to the NI increase that the decision has been made to delay for five years the introduction of a compulsory employer pension contribution of up to 3% which was due to take effect from 2012 onwards.