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The National Insurance Contributions Act 2008 also completed all of its stages before Parliament went into recess on 23 July. Some of the measures involving the upper earnings limit and the new upper accrual point have changed somewhat since the original Bill was introduced. The following notes summarise the changes.

Upper earnings limit
The existing provision that restricts the level of the NICs upper earnings limit (UEL) to not more than 7½ times the level of the NICs earnings threshold are repealed with effect from the 2009/10 tax year. Any amendment to the UEL from that year may no longer be made automatically by the government in line with retail price inflation but must be made by means of Regulations that will require parliamentary approval.

The automatic procedure for increasing the NICs lower earnings limit in line with the basic state pension was repealed in the Finance Act 2007, but with effect from a future tax year that is yet to be designated. The designated year will be year from which the government starts to link the basic state pension with earnings inflation instead of retail price inflation, likely 2012/13. From that time, any future increases will also require Parliamentary approval each year.

Upper accrual point
The tax year from which the NICs upper accrual point (UAP) will come into effect is confirmed as 2009/10. The permanent weekly value of the UAP is confirmed as £770 and the value applicable to other earnings periods may be defined by Regulations, rounded up to the next whole pound. The monthly and annual values, therefore, are likely to be £3,337 and £40,040 respectively. The power of the Secretary of State to increase or decrease the value of the UAP each year, as provided in the Pensions Act 2007, is removed.

Further information:
National Insurance Contributions Act 2008

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Written by Ian Congreave - Payroll writer and lecturer

Filed under: Legislation and case law - NIC on August 4th, 2008

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