National Insurance and Pensions

Madrick

Obviously I think NI will be in the news over the next few days

NI is not paid over state pension age
But if you retire early is it charged at 12% on payments above £797 per month (approx £9.6k pa)

If you retire early, do you also pay NI on the 25% portion of your drawdown which is tax free? 

ex-pat_scot

Short answer: noone knows yet.  
The signs are that NI might be charged on all earned income, including above retirement age.
Income taken from your pension is not classed as "earned", and unlikely to attract NI.
There is no suggestion that the 25% tax free element would attract NI.

Clearly SalSac schemes are going to get more valuable for both employers and employees.

kuratowski

No to both questions.  NI is only due on earned income - there are no NICs on pensions, savings, dividends or rental income.

No NI on either monthly pension payments or any tax free lump sums / pension commencement lump sums.

Madrick

Thanks for that 👍

daveyjp

kuratowski said:

No to both questions.  NI is only due on earned income - there are no NICs on pensions, savings, dividends or rental income.

No NI on either monthly pension payments or any tax free lump sums / pension commencement lump sums.

"At the moment".

Wait until later this afternoon to see what changes are proposed.

Although announcing how you are going to pay for something before announcing what you are actually buying is hardly strategic.

Flugelhorn

I'll  be a ratty pensioner if they start NI'ing pensions - just had a whole year without paying NI 

Madrick

daveyjp said:

kuratowski said:

No to both questions.  NI is only due on earned income - there are no NICs on pensions, savings, dividends or rental income.

No NI on either monthly pension payments or any tax free lump sums / pension commencement lump sums.

"At the moment".

Wait until later this afternoon to see what changes are proposed.

Although announcing how you are going to pay for something before announcing what you are actually buying is hardly strategic.

Just suppose that he were to make it payable by all..... regardless of state pension age, 
and then, count any pension payments as earned income, in the same way it is for tax purposes. 


I know its all speculation, but worse case scenario 

nick74

If they made NI applicable to unearned income it surely reaches the point that employee's NI may as well just be scrapped and lumped in with income tax.

MX5huggy

nick74 said:

If they made NI applicable to unearned income it surely reaches the point that employee's NI may as well just be scrapped and lumped in with income tax.

Yes and the world would wake up that Standard Rate tax payers are currently paying 32% (tax and NI) and higher rate 42%. 

I’m interested in Salary Sacrifice, I take advantage of it but it’s a loophole I can’t see why it exists. It’s only available for the better paid, because you cant Sacrifice below NMW and only for employees who randomly work for organisations that offer it. 

NedS

MX5huggy said:

nick74 said:

If they made NI applicable to unearned income it surely reaches the point that employee's NI may as well just be scrapped and lumped in with income tax.

Yes and the world would wake up that Standard Rate tax payers are currently paying 32% (tax and NI) and higher rate 42%. 

I’m interested in Salary Sacrifice, I take advantage of it but it’s a loophole I can’t see why it exists. It’s only available for the better paid, because you cant Sacrifice below NMW and only for employees who randomly work for organisations that offer it. 

The NI loophole for salary sacrifice really needs to be closed. That would help raise more NI receipts.

QrizB

NedS said:

The NI loophole for salary sacrifice really needs to be closed. That would help raise more NI receipts.

By the same measure, the NI loophole for unearned income really needs to be closed. That would help raise more NI receipts.