Low earners and NI

bigfreddiel

Low earners don't need to pay NI.

National Insurance and low earners
You don't have to pay National Insurance if you earn below a certain amount - in 2016-17, this is £8,060.

Does that mean you do not build up a years worth of national insurance towards your state pension. I'm guessing the answer is yes.

So if you earned £8,061 you would make a NI contribution and so qualify for a years worth of NI on your record.

So, be patient, this where I'm heading, as soon as anyone earns over £8,061 regardless of their final full years earnings, they would have paid for a years worth of NI contributions.

So, and here is the final part of the query, the NI people don't need to wait till the end of the tax year to credit us with a full year of NI contributions, they could do that as soon as anyone has earned over £8,061. Does that make sense?

Cheers fj

Darksparkle

Employees get NI credits towards pension and benefits if they earn over £112 per week.

Employee NIC is based on each pay period rather than an annual amount.

The self employed pay Class 2 NIC on profits over £5965 per year.

p00hsticks

Darksparkle wrote: »

Employees get NI credits towards pension and benefits if they earn over £112 per week.

As far as I understand it, the £112 has to be with a single employment

Personally, I worry that the trend for more and more low earners having to make a living via a portfolio of zero-hour contract and/or part time jobs are in danger of falling through the cracks here and risk not qualifying for a full pension because they don't reach the LEL in any of the individual jobs.

Darksparkle

p00hsticks wrote: »

As far as I understand it, the £112 has to be with a single employment

Personally, I worry that the trend for more and more low earners having to make a living via a portfolio of zero-hour contract and/or part time jobs are in danger of falling through the cracks here and risk not qualifying for a full pension because they don't reach the LEL in any of the individual jobs.

Yes NI differs from tax in that it looks at each individual employment (unless associated employer).

zagfles

p00hsticks wrote: »

As far as I understand it, the £112 has to be with a single employment

Personally, I worry that the trend for more and more low earners having to make a living via a portfolio of zero-hour contract and/or part time jobs are in danger of falling through the cracks here and risk not qualifying for a full pension because they don't reach the LEL in any of the individual jobs.

Although on the flip side, they could end up getting NI credits and yet pay far less NI (or none at all) compared to someone with one job. For instance 2 jobs earning £150pw, pay no NI, get NI credits. One job paying £300pw, you'd pay 12% on £145.

The NI system is bonkers. About time the govt did what they've been saying they'll do for ages - align the operation of NI with tax (and no this does not mean applying NI to pensions before anyone starts on that old chestnut again).

xylophone

Personally, I worry that the trend for more and more low earners having to make a living via a portfolio of zero-hour contract and/or part time jobs are in danger of falling through the cracks here and risk not qualifying for a full pension because they don't reach the LEL in any of the individual jobs.

It seems that the powers that be are on the case.....(but the cynic in me asks "How long O Lord, how long...)

https://www.moneymarketing.co.uk/govt-moves-to-help-low-paid-workers-excluded-from-state-pension/

"But workers have to earn at least £112 a week from a single job before a NI record begins to be built up. Even if all the jobs combined total over £112 a week no state pension entitlement is built up.

But the DWP has confirmed it will be addressing the issue.

A spokeswoman says: “The pensions minister has commissioned work to consider potential measures to help people with low-earning multiple jobs to build up a National Insurance contributions record.

“This work is ongoing and will need to take account of the roll-out of Universal Credit and the new state pension which may have significant implications for further reform in this area.” "

bigfreddiel

Interesting tho' the answers were, you've all missed the point.

What I wanted to know was that once you've earned £8,061, paid your national insurance then whether yo continue earning or not you have paid for a full years contributions. Whether it takes you a week or 52 weeks to earn £8,061 makes no difference does it?

Cheers fj

bigfreddiel

Darksparkle wrote: »

Employees get NI credits towards pension and benefits if they earn over £112 per week.

Employee NIC is based on each pay period rather than an annual amount.

The self employed pay Class 2 NIC on profits over £5965 per year.

Let's say I earned £5,824 in one year, only had the one job that year, then I would have a full year credit of NI contributions. Yes?

Now let's say I just happened to earn £5,824 in one week, rather than 52 weeks, and that was all I earned, still only the one job in that year and that was it. I would still have a full year credit of NI contributions. Yes?

Cheers fj

greenglide

Yes. As long as you earn that in a year, in a single employment, then it is a qualifying year.

It makes no difference whether it is in a single week or spread equally through the year. It can make a big difference to the contributions paid though since you can get a qualifying year without actually pay anything - the difference between the lower earnings threshold and the lower earnings limit.

Most of us have no control over the way out income is spread throughout the year though for most of us this is purely academic.

bigfreddiel

Thanks greenglide, and you're right it is academic, but what I'm alluding to is that once anyone earns this base amount, you could be credited with a qualifying year, the department that works this out would not need to wait till the end of the financial year. That could also spread out the processing over the year rather than waiting till the new period and having to process it all in one huge batch. Not that it really matters I guess.

But from what you and others say, if you have more than one job in a year, then this all goes out the window? So I'm not sure why having multiple jobs would cause this.

Cheers fj

zagfles

greenglide wrote: »

Yes. As long as you earn that in a year, in a single employment, then it is a qualifying year.

It makes no difference whether it is in a single week or spread equally through the year.

Yes it does make a difference, as earnings above the UEL don't count. The UEL is £815 this tax year, £827 next.

So if you earned £6000 in one week or month, then only £815 of it would count, or about £3532 if monthly pay. So that alone wouldn't make a qualifying year.

ETA: UEL not UAP