TT35: National Insurance Increases
A recent survey by a leading firm of consultants showed that 60% of the UK population are unaware how the impending rise in National Insurance Contributions will affect them! In fact, it’s going to cost most people dearly, and employers even more.
Current National Insurance Contributions:
10% of all salary in excess of £4,615 per annum and capped at a salary of £30,420 per year – a maximum of £2,580.50.
From 6 April 2003: 11% of all salary in excess of £4,615 per annum and capped at a salary of £30,940 per year PLUS a further 1% of salary in excess of this level.
NO MAXIMUM LIMIT ANY MORE.
The employer’s cost
Current National Insurance Contributions: 11.8% of all salary and benefits in kind above the annual limit of £4,615.
From 6 April 2003: 12.8% of all salary and benefits in kind above the annual limit of £4,615.
A RISE OF AN ADDITIONAL 1%.
Barnes Roffe Topical Tips
- Business owners should be aware that paying bonuses before 6 April 2003 would avoid this increase in National Insurance. They should therefore consider if it is possible to advance any bonuses for them and staff to fall before this important deadline.
- Business owners should keep their remuneration plans under regular review to ensure they are the most efficient.
- Dividends may be more suitable than salary in certain circumstances, but dividends and salary payments have advantages and disadvantages depending on the company’s and the individual’s tax profiles (and other non-tax circumstances). Advice should be sought on this important area.