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03 November 1998

IR 1 Alignment of employers´ NICS threshold and income tax personal allowance

The employers' threshold for National Insurance Contributions (NICs) and the basic Personal Allowance for income tax will be aligned at #83 a week (#4335 a year) for 1999/2000, announced Chancellor Gordon Brown today.

The allowance, and thus the level of the new threshold, is consistent with an uprating in line with the increase in the Retail Prices Index to September.

Notes to editors

1. The Chancellor announced in his Budget Statement on 17 March that the employers' threshold for NICS would be aligned with the income tax personal allowance from April 1999. He has announced indexation of the income tax personal allowance - which governs the NICs threshold for employers - in advance of the Budget, to allow employers time to be ready for the new threshold by the beginning of April.
2. Any announcements on the other income tax personal allowances will be made in the Budget in the normal way.
3. Income tax legislation requires the main allowances and thresholds to be increased in line with the Retail Prices Index to September unless Parliament determines otherwise. A Treasury Order setting out the indexed level of the Personal Allowance has been made today. A further Order on the remaining allowances will be made as usual on Budget Day.
4. Unlike income tax under PAYE, NICS are not collected on an annual and cumulative basis. They are calculated and become final for each pay period, normally a week or a month. This means that the correct NICS thresholds and rates need to be in place at the start of the contributions year, to allow contributions to be made in respect of employees' pay.
5. The Chancellor announced in his last Budget his intention to;
   • align the earnings point at which people start to pay NICs with the income tax personal allowance; but
   • protect access to contributory benefits for those who would otherwise lose it because they no longer had earnings on which NICs had to be paid.

   This further alignment will take place when the benefit entitlement conditions have been reformed.

Media enquiries to:
Paul Jefferies Clare Merrills 0207 438 66921/6706
(Out of hours: 0860 359544)

Non-media enquiries:0207 438 64201/6425
(Office hours only)

Inland Revenue information is available on the Internet: www.inlandrevenue.gov.uk

HM Treasury press contacts
Press enquiries to: 0207 270 5238
Non-media enquiries to: 0207 270 4558

# = pounds sterling

Pre Budget 1998 Press Notices index page

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