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Treasury

Answer

Mr. Clappison: To ask the Chancellor of the Exchequer what the National Insurance Contribution liability was of a self-employed person earning (a) £20,000 and (b) £30,000 in the financial years (i) 1996-97, (ii) 1999-2000 and (iii) 2000-01; and what it will be in 2001-02. [150049] Dawn Primarolo: [holding answer 12 February 2001]: Since 1999, this Government have introduced a package of measures to build a fairer National Insurance system, to improve work incentives and encourage job creation. In particular, we have aimed to improve the position of lower earning self-employed people and to address the under-contribution of the self-employed as a whole to the National Insurance Fund, compared with the National Insurance contributions (NICs) payable by employees and employers. The self-employed pay class 2 which is a weekly flat rate charge and class 4 which is charged as a percentage of profits over the lower profits limit up to the upper profits limit. In the March 1999 Budget the Chancellor announced a reform of self-employed NICs to reduce the burden of National Insurance on the lowest earning self-employed and encourage the start up of self-employed businesses. The flat rate was reduced from £6.55 a week to £2 a week and the class 4 rate was increased from 6 per cent. to 7 per cent. The starting point for payment of Class 4 NICs has also been aligned with the income tax personal allowance. These changes were introduced following recommendations of the Taylor report. Over the period mentioned in the question the Government have also introduced a number of measures on income tax. For example, it has introduced and extended the 10p starting rate, cut basic rate to 22p, introduced the Working Families Tax Credit and introduced the Children's Tax Credit, which reduce direct tax. By October 2001 as a result of personal tax and benefit measures, UK households will be on average £590 a year better off and families with children will be £1,000 better off on average from measures introduced over the parliament as a whole. The NICs and income tax liabilities will depend on many circumstances. The table shows the net effect of changes to NICs and income tax for a single self-employed earner who has no children. £ _________________________________________________________________________________________________. Year/Income NICs Income tax Total 1996-97 10,000 503.00 1,340.40 1,843.40 20,000 1,103.00 3,740.40 4,843.40 30,000 1,322.60 6,258.00 7,580.60 1999-2000 10,000 488.80 1,107.95 1,596.75 20,000 1,088.80 3,407.95 4,496.75 30,000 1,448.80 5,707.95 7,156.75 2000-01 10,000 497.05 1,052.90 1,549.95 20,000 1,197.05 3,252.90 4,449.95 30,000 1,744.45 5,452.90 7,197.35 2001-02 10,000 486.55 976.70 1,463.25 20,000 1,186.55 3,176.70 4,363.25 30,000 1,879.55 5,376.70 7,256.25 _________________________________________________________________________________________________. The following table shows the net effect of changes to NICs, Family Credit, Child Benefit and Income Tax (including the abolition of the married couple's allowance and introduction of the Children's Tax Credit and Working Families Tax Credit) for a family unit which contains a single self-employed earner, who is working more than 30 hours, married and has two children under 11. £ _________________________________________________________________________________________________. Year/Income NICs Family credit/Child Income tax (including Total benefit WFTC) 1996-97 10,000 503.00 2,031.91 1,071.90 - 457.01 20,000 1,103.00 1,019.20 3,471.90 3,555.70 30,000 1,322.60 1,019.20 5,989.50 6,292.90 1999-2000 10,000 488.80 2,075.64 - 690.28 -2,277.12 20,000 1,088.80 1,248.00 3,210.95 3,051.75 30,000 1,448.80 1,248.00 5,510.95 5,711.75 2000-01 10,000 497.05 1,300.00 -2,700.04 -3.502.99 20,000 1,197.05 1,300.00 3,215.83 3,112.88 30,000 1,744.45 1,300.00 5,452.90 5,897.35 2001-02 10,000 486.55 1,344.20 -3,456.43 -4,314.08 20,000 1,186.55 1,344.20 2,587.64 2,429.99 30,000 1,879.55 1,344.20 4,856.70 5,392.05 _________________________________________________________________________________________________.

Secondary information

Type

Written question

Reference

150049; 365 c527-8W;365 c529-30W

Session

2000-01

Subjects

Income tax Income National insurance contributions Self-employed Working families tax credit

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk