27 Mar 2001 : Column: 529W
Written Answers to Questions
Tuesday 27 March 2001
TREASURY
National Insurance
Mr. Clappison: To ask the Chancellor of the Exchequer what the National Insurance Contribution liability was of a self-employed person earning (a) £20,000 and (b) £30,000 in the financial years (i) 1996-97, (ii) 1999-2000 and (iii) 2000-01; and what it will be in 2001-02. [150049]
Dawn Primarolo [holding answer 12 February 2001]: Since 1999, this Government have introduced a package of measures to build a fairer National Insurance system, to improve work incentives and encourage job creation. In particular, we have aimed to improve the position of lower earning self-employed people and to address the under-contribution of the self-employed as a whole to the National Insurance Fund, compared with the National Insurance contributions (NICs) payable by employees and employers.
The self-employed pay class 2 which is a weekly flat rate charge and class 4 which is charged as a percentage of profits over the lower profits limit up to the upper profits limit.
In the March 1999 Budget the Chancellor announced a reform of self-employed NICs to reduce the burden of National Insurance on the lowest earning self-employed and encourage the start up of self-employed businesses. The flat rate was reduced from £6.55 a week to £2 a week and the class 4 rate was increased from 6 per cent. to 7 per cent. The starting point for payment of Class 4 NICs has also been aligned with the income tax personal allowance. These changes were introduced following recommendations of the Taylor report.
Over the period mentioned in the question the Government have also introduced a number of measures on income tax. For example, we have introduced and extended the 10p starting rate, cut the basic rate to 22p, introduced the Working Families Tax Credit and the Children's Tax Credit, which reduce direct tax.
By October 2001 as a result of personal tax and benefit measures, UK households will be on average £590 a year better off and families with children will be £1,000 better off on average from measures introduced over the parliament as a whole.
The NICs and income tax liabilities will depend on many circumstances.
The table shows the net effect of changes to NICs and income tax for a single self-employed earner who has no children.
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| Year/Income | NICs | Income tax | Total |
|---|---|---|---|
| 1996-97 | |||
| 10,000 | 503.00 | 1,340.40 | 1,843.40 |
| 20,000 | 1,103.00 | 3,740.40 | 4,843.40 |
| 30,000 | 1,322.60 | 6,258.00 | 7,580.60 |
| 1999-2000 | |||
| 10,000 | 488.80 | 1,107.95 | 1,596.75 |
| 20,000 | 1,088.80 | 3,407.95 | 4,496.75 |
| 30,000 | 1,448.80 | 5,707.95 | 7,156.75 |
| 2000-01 | |||
| 10,000 | 497.05 | 1,052.90 | 1,549.95 |
| 20,000 | 1,197.05 | 3,252.90 | 4,449.95 |
| 30,000 | 1,744.45 | 5,452.90 | 7,197.35 |
| 2001-02 | |||
| 10,000 | 486.55 | 976.70 | 1,463.25 |
| 20,000 | 1,186.55 | 3,176.70 | 4,363.25 |
| 30,000 | 1,879.55 | 5,376.70 | 7,256.25 |
The following table shows the net effect of changes to NICs, Family Credit, Child Benefit and Income Tax (including the abolition of the married couple's allowance and introduction of the Children's Tax Credit and Working Families Tax Credit) for a family unit which contains a single self-employed earner, who is working more than 30 hours, married and has two children under 11.
| Year/Income | NICs | Family credit/Child benefit | Income tax (including WFTC) | Total |
| 1996-97 | ||||
| 10,000 | 503.00 | 2,031.91 | 1,071.90 | - 457.01 |
| 20,000 | 1,103.00 | 1,019.20 | 3,471.90 | 3,555.70 |
| 30,000 | 1,322.60 | 1,019.20 | 5,989.50 | 6,292.90 |
| 1999-2000 | ||||
| 10,000 | 488.80 | 2,075.64 | - 690.28 | -2,277.12 |
| 20,000 | 1,088.80 | 1,248.00 | 3,210.95 | 3,051.75 |
| 30,000 | 1,448.80 | 1,248.00 | 5,510.95 | 5,711.75 |
| 2000-01 | ||||
| 10,000 | 497.05 | 1,300.00 | -2,700.04 | -3.502.99 |
| 20,000 | 1,197.05 | 1,300.00 | 3,215.83 | 3,112.88 |
| 30,000 | 1,744.45 | 1,300.00 | 5,452.90 | 5,897.35 |
| 2001-02 | ||||
| 10,000 | 486.55 | 1,344.20 | -3,456.43 | -4,314.08 |
| 20,000 | 1,186.55 | 1,344.20 | 2,587.64 | 2,429.99 |
| 30,000 | 1,879.55 | 1,344.20 | 4,856.70 | 5,392.05 |
Mr. Clappison: To ask the Chancellor of the Exchequer (1) how many self-employed persons paid (a) only class 2 National Insurance Contributions and (b) class 2 and class 4 Contributions in 1999-2000; and what estimate he has made of the same figures for 2000-01; [144833]
- (2) what the proceeds were of (a) class 2 and (b) class 4 National Insurance Contributions in (i) 1998-99 and (ii) 1999-2000; and what estimate he has made of the same figures for 2000-01. [144832]
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Dawn Primarolo: The reform of class 2 and class 4 National Insurance Contributions (NICs) will reduce the burden on low earners and encourage business start-ups. In 1999-2000, around 0.7 million self employed are estimated to be liable to pay only class 2 and 1.8 million are estimated to be liable to pay class 2 and class 4 NICs. For 2000-01 around 0.2 million are estimated to be liable to pay only class 2 and some 2.3 million are estimated to be liable to class 2 and class 4 NICs. Theses estimates are based on the survey of personal incomes.
Estimates for class 2 and class 4 NICs receipts in 1998-99 to 2000-01 for the United Kingdom are given in the table.
| UK NICs receipts | |||
|---|---|---|---|
| Year | Class 2 | Class 4 | Total |
| 1998-99 | 680 | 960 | 1,640 |
| 1999-2000 | 730 | 990 | 1,720 |
| 2000-01 | 350 | 1,040 | 1,390 |
These estimates were provided by the Government Actuary's Department.
Working Families Tax Credit
Mr. Willetts: To ask the Chancellor of the Exchequer, pursuant to the oral answer of 1 March 2001, Official Report, column 1022, from the Paymaster General, on what evidence she based her claim that the majority of employers have welcomed the Working Families Tax Credit. [155433]
Dawn Primarolo: The evidence is that over 1.1 million working families now receive WFTC--300,000 more than received Family Credit at its peak. Thanks to the generosity of WFTC awards, employers are now able to offer jobs to people who would otherwise face financial barriers to work. This is a significant benefit to employers and the economy as a whole. The CBI has supported the WFTC which it has described as playing
"a key role in raising incentives to work by targeting additional resources on those people who are most likely to suffer from the poverty and unemployment traps".
Dawn Primarolo [holding answer 23 March 2001]: Whether such families are entitled to Working Families Tax Credit, and the sizes of their awards, depends on other conditions, including their savings. The Inland Revenue booklet WFTC/BK1, "Your Guide to Working Families' Tax Credit" explains how to calculate whether a family is entitled to an award, and its size. A copy is available on the Inland Revenue website: www.inlandrevenue.gov.uk. The values of the various
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credits, and the income threshold, for 2000-01 and 2001-02 are shown in Table A.3 of the Budget 2001 Red Book.
Budget Measures (London)
Ms Harman: To ask the Chancellor of the Exchequer if he will make a statement on the (a) expected impact of the 2001 Budget and (b) combined impact of the Budget measures of 1998, 1999 and 2000 on (i) women and (ii) men in London. [155007]
Dawn Primarolo: The impact of Budget measures on men and women cannot be measured separately for London. For the UK as a whole, by October 2001, as a result of personal tax and benefit measures:
- on average women will be £85 a year better off and men will be £80 a year better off from Budget 2001, compared to an indexed Budget 2000 base;
- on average women will be £440 a year better off and men will be £225 a year better off from measures introduced over the Parliament as a whole, compared to an indexed 1997 base. For households, the average gain will be £590 a year.
- the introduction of the Children's Tax Credit will benefit 475,000 families;
- the increase in the 10p income tax band will benefit around three million tax payers;
- the £5 increase in WFTC will benefit 85,000 working families.
Dawn Primarolo: Both self-employed people and employees may be eligible for Working Families Tax Credit (WFTC) if they are on low or middle incomes, work 16 hours or more a week and if they are responsible for one or more children. WFTC is available to people working in businesses affected by foot and mouth disease, just as it is to other employed or self-employed people.
Mrs. Gilroy: To ask the Chancellor of the Exchequer in what circumstances employees who work for small businesses which have cash flow problems resulting in reduced working hours and changed conditions of employment may become eligible for the Working Families Tax Credit; and if he will make a statement with specific reference to businesses affected by foot and mouth disease. [155353]
Dawn Primarolo: Working Families Tax Credit (WFTC) provides an earnings top-up for low and middle income working families. An employee working for a small business--including any business affected by foot and mouth disease--would be eligible to apply for WFTC as long as he or she works for 16 hours or more a week and has one or more dependent children.
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