Tax & Accounting News

New national insurance band highlighted

03/04/2009

Harris Lipman is reminding employers and higher earners that a new national insurance band will take effect from 6 April.

From that date, an upper accrual point (UAP) for national insurance contributions will apply to earnings of more than £770 a week, or £40,040 a year.

The UAP will replace the upper earning limit (UEL) – the threshold for which stands at £844 a week or £43,888 a year – as the limit for calculating the State Pension. Other effects of the UAP include:

• the calculation of contracted-out rebates will be based on earnings between the lower earnings limit (LEL) and the UAP
• pension schemes that have any form of integration with state benefits may need to review their benefit provision
• employees and employers will continue to pay full rate national insurance contributions on earnings between the UAP and UEL.

Because the UAP will be frozen at £770 a week, those who have contracted out of the state pension scheme will pay disproportionately more in national insurance.

Employers also need to update their payroll systems to include the UAP band from 6 April 2009 and this additional band of earnings will also need to be recorded on forms P11 and P14.

For more information, please contact us.

 

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