Specifying the amount of the Upper Earnings Limit
9.The National Insurance contribution rates and thresholds which include the upper earnings limit are reviewed each year and, where appropriate, changed each year in secondary legislation by reference to the retail price index. The power to set the upper earnings limit is conferred on the Treasury. The Treasury may increase or decrease the upper earnings limit; so far as increases are concerned, the power is limited in that the upper earnings limit can be set at no more than seven and a half times the primary threshold. The primary threshold is the point at which primary Class 1 contributions become payable on a person’s earnings.
Changes
10.In his 2007 Budget speech the Chancellor of the Exchequer announced that from April 2009 the upper earnings limit would be aligned with the level at which higher rate income tax is payable. It is intended that this alignment will be achieved in two stages. The first stage was to increase the upper earnings limit by £75 per week above inflation for the 2008-09 tax year, by using existing powers. This increase was included as part of the normal 2008-09 up-rating exercise.
11.The second stage, subject to the usual Parliamentary process (which in this case would include Parliamentary approval) is to increase the upper earnings limit as part of the normal up-rating exercise, so that it is aligned with the level at which higher rate income tax becomes payable. To enable this second stage to take place, the existing restriction on the power to set the level of the upper earnings limit needed to be removed. The Act removes that restriction in relation to tax year 2009-10 and beyond.