In his 1998 Budget, the Chancellor of the Exchequer announced a package of reforms to the structure of NICs. Most of these changes were introduced in the Social Security Act 1998, and came into effect in April 1999. As a result:
	The point at which employers start to pay NICs (the employer earnings threshold) is set at the same level as the single person’s tax allowance (currently £83 a week) rather than the Lower Earnings Limit (currently £66 a week);
	Employees no longer have to pay any contributions on earnings up to and including the Lower Earnings Limit, and employers do not pay any contributions on earnings below the employer earnings threshold;
	The four employer rates of contributions have been replaced by a single rate of 12.2%, and Class 1B contributions have been introduced. Class 1B contributions are paid by employers who enter into a PAYE Settlement Agreement with Inland Revenue for tax.
The Chancellor also announced in 1998 that he would raise the point at which employees start to pay NICs to the level of the single person’s tax allowance as soon as measures were in place to protect people against the benefit losses that would otherwise result. These changes were confirmed in the 1999 Budget. In his 1999 Budget statement, the Chancellor also announced that the Upper Earnings Limit (UEL) for employee contributions would be raised to £535 a week in 2000, and £575 in 2001; and that changes would be made to counter National Insurance avoidance where services are provided through an intermediary.
Overview 6.National Insurance contributions (NICs) Background