National Insurance Changes in 2016 – You can’t wait!

The blog this week focuses on changes to National Insurance in 2016 – while this is some time off, these changes will impact upon all schools significantly.

The Department for Work and Pensions has published guidance for both employers and employees on the ending of contracting-out of the additional State Pension. This guidance explains the changes being made to the State Pension for people who will reach State Pension age on or after 6 April 2016.

Employers who offer a salary related pension scheme (this includes TPS & LGPS) pay National Insurance contributions at a lower rate because they get a National Insurance rebate. Employees also pay reduced contributions.

On the 6 April 2016, the new State Pension will replace the existing basic and additional State Pension and will bring to an end contracting-out and the National Insurance rebate. This means that from April 2016, all employers and employees will pay the standard rate of National Insurance contributions instead of the contracted-out rate.

For employers, the standard rate of National Insurance is currently 13.8% of all earnings above the secondary threshold for all employees and they will no longer receive the 3.4% National Insurance rebate. The 1.4% National Insurance rebate for those employees in contracted-out schemes will also end.

The Department for Work and Pensions’ guidance on this topic can be found here.

So what does this mean for schools?

Whilst the National Insurance tables are not known for 2016-17 based on the current year’s rates schools with a teaching salary bill of, for example, £1 million, could see an increase close to £25,000.

In the last blog we stressed the importance of having a three year finance plan. Schools should run comparison budgets using existing and suggested NI contributions to see the impact upon their school or academy.

What can we do to help?

School Business Services have added ‘indicative’ NI Tables for 2016/2017 to its online planning software SBS Online, to help schools and academies plan their budgets for up to 5 years. The planner also allows you to see the impact of future changes to Teachers and Local Government Pension Schemes

If you would like to know more about SBS Online or receive help from our consultants in constructing your budget please contact us on 0345 222 1551 – Option 2

SBS provides expert advice on all aspects of education finance, from service desk support to complete financial management. Learn more about how we can help your school.

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