I have been trying to work out how the Government has calculated that employees earning less than £20,000 will not pay any more national insurance when the class 1 national insurance rate rises (in April, 2011) from 11% to 12%. In fact, this statement in the recent budget is not all it seems. The devil is in the detail and we are again being bamboozled by the spin of our current breed of politicians.
The 1% increase in employee’s national insurance from 11% to 12% (effective from 6th April, 2011) has been announced in 2 tranches. It was first announced in the 2008 Pre-Budget Report as a 0.5% increase and now in the 2010 Budget as a further 0.5% increase (which confirmed the 2009 Pre-Budget Report).
The statement in the budget that employees earning £20,000 or less will pay no more national insurance only relates to the second 0.5% rise announced in the budget. The first 0.5% increase has not been included in the calculation as it was not a new announcement.
In fact, a person earning £20,000 p.a. will pay £74 more National Insurance in 2011/12 than in the current tax year.
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