The Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2000

Explanatory Note

(This note is not part of the Order)

Following the transfer of National Insurance functions and associated functions from the Secretary of State and the Department of Health and Social Services for Northern Ireland to the Treasury, effected by the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (1999 c. 2) and the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671), the opportunity is being taken to combine the relevant annual changes to National Insurance Contributions for Great Britain and Northern Ireland in a single instrument.

This Order amends the rates of Class 2 and Class 3 contributions specified in sections 11(1) and 13(1) of the Social Security Contributions and Benefits Act 1992 (“the Act”) from £6.55 to £2.00, and from £6.45 to £6.55, respectively. It also increases from £3,770 to £3,825 the amount of earnings specified in section 11(4) of the Act, below which an earner may be excepted from liability for Class 2 contributions (Articles 2 and 3).

The Order increases the rate of Class 4 contributions specified in sections 15(3) and 18(1) of the Act, from 6 per cent to 7 per cent. It also amends, from £7,530 to £4,385 and from £26,000 to £27,820 respectively, the lower and upper limits of profits or gains specified in those sections, between which Class 4 contributions are payable (Article 4).

Articles 2 to 4 of the Order also make provision for Northern Ireland corresponding to that in the preceding two paragraphs (the section numbers are the same in the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (1992 c. 7)).

The Order provides for section 2(2) of the Social Security Act 1993 to have effect for the tax year 2000–01. It also provides that the amount of any money that may be provided by Parliament to be paid into the National Insurance Fund in that year shall not exceed in aggregate 2 per cent. of the estimated benefit expenditure for the financial year ending 31st March 2001 (Article 5). The Order also makes corresponding provision for Northern Ireland (Article 4(3) of the Social Security (Northern Ireland) Order 1993 being the provision brought into effect) (Article 6).

In accordance with sections 142(1) and 144(1) of the Social Security Administration Act 1992, a copy of the report by the Government Actuary (Cm. 4587) 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 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 2, 3, 5 and 6 of the Order do not impose any new costs on business. Certain contribution rates and limits increase broadly in line with the rise in price inflation. Article 2 substantially reduces the Class 2 contributions payable by the self-employed. The effect of Article 4 will be to increase the Class 4 contributions payable by some of the self-employed.