Management Information Sheet

Changes to National Insurance contributions have been announced by the Government and become effective from April 2016.

The changes are linked to the changes to the State Pension effective from 6 April 2016 and the end of 'contracting-out'. Find more information about the new state pension and the effect on workplace pensions.

Employees who are below State Pension age and are members of a work pension scheme that is 'contracted-out', eg Local Government Pension Scheme or Teachers Pension Scheme, will be affected by this change. Staff who are not members of a work pension scheme will not be affected.

What does this mean?

Employers sponsoring contracted-out schemes and their employees who are scheme members receive a rebate on their National Insurance contributions (NICs). For employers this is a reduction of 3.4% and for employees 1.4% (on a proportion of earnings).

From April 2016, you and your employees will pay the standard rate (class 1) of NICs instead of the contracted-out rate.

The current employer standard rate is 13.8% of all earnings above the secondary threshold for all employees, you will no longer get the 3.4% National Insurance rebate.

Employees affected by the change will no longer get the 1.4% rebate. They can use the Contributions calculator on the HMRC website to get an indication of the extra cost. To access the calculator, click on start again, bottom left of the screen. Most employees are currently on NI category letter D and will move to NI category letter A. (Please note that the calculator currently provides information based on 2015/16 rates).