The Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1996

Statutory Instruments

1996 No. 597

SOCIAL SECURITY

The Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1996

Made

6th March 1996

Coming into force

6th April 1996

Whereas the Secretary of State for Social Security, as a result of carrying out in the tax year 1995–96 a review of the general level of earnings pursuant to section 141(1) and (2) of the Social Security Administration Act 1992(1) (“the Administration Act”), has determined that an Order should be made under that section amending Part I of the Social Security Contributions and Benefits Act 1992(2) (“the Contributions and Benefits Act”) by altering the rates of Class 2 and Class 3 contributions, the amount of earnings below which an earner may be excepted from liability for Class 2 contributions and the lower and upper limits of profits or gains to be taken into account for Class 4 contributions:

And whereas the Secretary of State, with a view to adjusting the level at which the National Insurance Fund stands and having regard to the sums which may be expected to be paid from the Fund in the tax year 1996–97, has determined that an Order should be made under section 143(1) of the Administration Act, and, for the purpose of adjusting amounts payable by way of secondary Class 1 contributions, has determined that an Order should be made under section 145(2) of the Administration Act amending section 9(3) of the Contributions and Benefits Act by altering the weekly earnings figures therein specified:

And whereas the Secretary of State, with a view to adjusting the level at which the National Insurance Fund stands for the time being and having regard to estimated benefit expenditure for the financial year ending 31st March 1997, thinks it expedient that an Order should be made under section 2(2) of the Social Security Act 1993 (“the 1993 Act”)(3):

And whereas a draft of the following Order was laid before Parliament in accordance with the provisions of sections 141(3) and 190(1) of the Administration Act and section 2(8) of the 1993 Act and approved by resolution of each House of Parliament:

Now, therefore, the Secretary of State for Social Security in exercise of powers conferred by sections 141(4) and (5), 142(2), 143(1) and (2), 145(2) and 189(1) and (3) of the Administration Act and, with the consent of the Treasury, section 2(2) and (8) of the 1993 Act and of all other powers enabling him in that behalf, hereby makes the following Order:

Citation, commencement and interpretation

1.—(1) This Order may be cited as the Social Security (Contributions) (Re-rating and National Insurance Fund Payments) Order 1996 and shall come into force on 6th April 1996.

(2) In this Order “the Act” means the Social Security Contributions and Benefits Act 1992.

Weekly earnings figures for secondary earnings brackets

2.—(1) Section 9 of the Act (calculation of secondary Class 1 contributions)(4) shall be amended in accordance with the provisions of this article.

(2) In subsection (3) (secondary earnings brackets)—

(a) for the figure “£104.99” specified in respect of Bracket 1 there shall be substituted the figure “£109.99”;

(b) for the figures “£105.00” and “£149.99” specified in respect of Bracket 2 there shall be substituted respectively the figures “£110.00” and “£154.99”;

(c) for the figures “£150.00” and “£204.99” specified in respect of Bracket 3 there shall be substituted respectively the figures “£155.00” and “£209.99”;

(d) for the figure “£205.00” specified in respect of Bracket 4 there shall be substituted the figure “£210.00”.

Rate of, and small earnings exception from, Class 2 contributions

3.  In section 11 of the Act (Class 2 contributions)(5)—

(a) in subsection (1) (weekly rate) for the figure “£5.75” there shall be substituted the figure “£6.05”;

(b) in subsection (4) (small earnings exception) for the figure “£3,260” there shall be substituted the figure “£3,430”.

Amount of Class 3 contributions

4.  In section 13(1) of the Act (amount of Class 3 contributions)(6) for the figure “£5.65” there shall be substituted the figure “£5.95”.

Percentage rate and lower and upper limits for Class 4 contributions

5.  In section 15(3) and section 18(1) of the Act (Class 4 contributions recoverable under the Income Tax Acts and under regulations)(7)

(a) for the percentage rate figure “7.3 per cent.” in both places where it appears there shall be substituted the figure “6 per cent.”;

(b) for the figure “£6,640” (lower limit) in each place where it appears there shall be substituted the figure “£6,860”;

(c) for the figure “£22,880” (upper limit) in both places where it appears there shall be substituted the figure “£23,660”.

Prescribed percentage of estimated benefit expenditure

6.  Section 2(2) of the Social Security Act 1993 (payments into National Insurance Fund out of money provided by Parliament) shall have effect with respect to the tax year 1996–97 and the prescribed percentage of estimated benefit expenditure for the financial year ending with 31st March in that tax year shall be 6 per cent..

Signed by authority of the Secretary of State for Social Security.

Alistair Burt

Minister of State,

Department of Social Security

29th February 1996

We consent,

Simon Burns

Michael Bates

Two of the Lords Commissioners of Her Majesty’s Treasury

6th March 1996

Explanatory Note

(This note is not part of the Order)

This Order increases the amounts of weekly earnings specified in the secondary earnings brackets in section 9(3) of the Social Security Contributions and Benefits Act 1992 (“the Act”), in respect of Bracket 1 from £104.99 to £109.99, in respect of Bracket 2 from £105.00 and £149.99 to £110.00 and £154.99, in respect of Bracket 3 from £150.00 and £204.99 to £155.00 and £209.99 and in respect of Bracket 4 from £205.00 to £210.00 (article 2).

The Order increases the rates of Class 2 and Class 3 contributions specified in sections 11(1) and 13(1) of the Act from £5.75 to £6.05 and from £5.65 to £5.95 respectively. It also increases from £3,260 to £3,430 the amount of earnings specified in section 11(4) below which an earner may be excepted from liability for Class 2 contributions (articles 3 and 4).

The Order increases, from £6,640 to £6,860 and from £22,880 to £23,660 respectively, the lower and upper limits of profits or gains specified in sections 15(3) and 18(1) of the Act between which Class 4 contributions are payable. The Order also reduces the percentage rate in respect of Class 4 contributions from 7.3 per cent. to 6 per cent. (article 5).

The Order provides for section 2(2) of the Social Security Act 1993 to have effect for the tax year 1996–97. It also provides that the amount of money provided by Parliament to be paid into the National Insurance Fund in that year shall not exceed in aggregate 6 per cent. of the estimated benefit expenditure for the financial year ending 31st March 1997 (article 6).

In accordance with sections 142(1), 144(1) and 147(2) of the Social Security Administration Act 1992, a copy of the report by the Government Actuary (Cm. 3149) giving his opinion on the likely effect on the National Insurance Fund of the making of the Order in so far as it amends sections 9(3), 11(1) and (4), 13(1), 15(3) and 18(1) of the Act, was laid before Parliament with the draft of this Order.

Articles 3(b), 4, 5 and 6 of this Order do not impose any costs on business. The effect of article 2 will be to impose an administrative cost on business. The effect of article 3(a) will be to increase the National Insurance contributions payable by the self-employed.

An assessment of the costs to business of applying articles 2 and 3(a) has been placed in the Libraries of both Houses of Parliament. Copies can be obtained by post from the Department of Social Security, Deregulation Unit, 9th Floor, Adelphi, 1-11 John Adam Street, London WC2N 6HT.

(1)

1992 c. 5.

(2)

1992 c. 4.

(3)

1993 c. 3.

(4)

Section 9 was further amended by article 2 of S.I. 1995/561 from 6th April 1995.

(5)

Section 11 was further amended by article 3 of S.I. 1995/561 from 6th April 1995.

(6)

Section 13 was further amended by article 4 of S.I. 1995/561 from 6th April 1995.

(7)

The lower and upper limits were further amended by article 5 of S.I. 1995/561 from 6th April 1995 and the percentage rate figure was amended by article 5 of S.I. 1994/544 from 6th April 1994.