Emergency Budget 2010: National Insurance increases

The National Insurance contribution rate rises proposed by Alistair Darling will take effect next April, as confirmed by a press notice issued after today’s Budget.

Both the 1% rise for employees and employers will be introduced as planned, although the government stated that it intended to abolish these rises as part of the general election campaign.

To mitigate the effect of the changes, there will be a significantly above inflation rise in the employer threshold for NIC from April 2011, the entry point for contributions rising by £21 above indexation. This means that employers with staff earning at a relatively modest salary may see their employee NIC fall as a result, but those employing higher paid staff will suffer an increase in employment costs.

Employees will bear the brunt of a 1% increase across the board, with a rise in the main rate from 11% to 12%, but sheltered a little by the above inflatiuon planned increase in the tax threshold – although of course this does mean that the tax reductions some have been promised will be soaked up in additional national insurance contributions.