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