PART 3: NATIONAL INSURANCE
Class 3A A one-off addition which applied from 12th October 2015 until 5th April 2017 and allowed those who were due to reach state retirement age before 6th April 2016 to top up their contributions and achieve a larger state retirement pension than they would otherwise have done. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS Class 4 Self-employed contributions, paid at a percentage rate on profits between lower and upper limits. Classes 1, 2 and 3 count towards an employee’s contribution record. The definition of an employed earner in relation to National Insurance classification is critical, and includes: • employees under a contract of service, and • persons in elected office (company directors, local authority elected members, MPs and Ministers of religion). In cases of doubt about the contractual status of an employee, advice should be sought from HMRC’s National Insurance Contributions and Employer Office. Future developments The government intends to abolish the Class 2 NICs and its voluntary equivalent and may extend the scope of Class 4 to make such contributions count towards contributory benefits. This was included in the 2017 finance act but withdrawn almost immediately afterwards following widespread criticism. There is still an intention to make significant changes to self-employed NICs so that both the contribution rate and access to benefits is equal to that enjoyed by employed earners. NATIONAL INSURANCE – HISTORICAL NOTES From April 1976 to March 1978 When earnings reached the Lower Earnings Limit (LEL) the employee paid contributions as a percentage of all earnings up to the Upper Earnings Limit (UEL). From April 1978 From April the contribution rate was dependent on whether the employee was contracted-out of the State Earnings Related Pension Scheme (SERPS), now S2P. Employees and employers who were contracted-out paid lower primary and secondary contributions on earnings between the LEL and the UEL (the NI Rebate). The contribution rate on earnings up to the LEL was payable at the not contracted-out rate in all cases. From October 1985 From October a sliding scale of contributions was introduced. Employers’ contributions on earnings above the UEL were payable at not contracted-out rates. This principle applied to both No printing, copying or reproduction permitted. From April 1977 to 1st October 1984 Secondary contributions included a National Insurance Surcharge as part of general tax revenue.
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