The Government has announced that it is working toward the integration of the income tax and national insurance systems in order to make the system more user friendly. A consultation document will be published later this year. The Government has stated that:
- the contributory principle will be maintained
- National Insurance Contributions will not be extended to pensioners or to pensions income, savings income or dividends.
From 2012/13 the basis for indexing the national insurance contribution rates will be the Consumer Prices Index (CPI) rather than the RPI for the following rates, limits and thresholds:
- class 1 lower earnings limit and primary threshold
- class 2 small earnings exception
- class 4 lower profits limit, and
- rates of class 2 and 3.
The secondary threshold for class 1 employers' national insurance contributions will continue to rise by the increase in the RPI from April 2012 to 2015/16. The increase from 12.8 per cent to 13.8 per cent will go ahead as planned on 6 April 2011. The annual levels of the class 1 upper earnings limit and the class 4 upper profits limit will continue to be aligned with the income tax higher rate threshold [the sum of the personal allowance and the basic rate limit].
