National Insurance and Pensions

Prism

NedS said:

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.

Its not really a loophole. If you get less pay you pay less national insurance. The only way would be to prevent all company pre tax contributions to pensions. How would that then affect DB pensions.

2nd_time_buyer

NedS said:

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.

I think the reluctance to close it may be that it partially addresses the apparent inequality in tax relief rates on pension contributions.

Without salary sacrificed
- Basic rate relief 20%
- Higher rate tax relief 40%
i.e. difference of 20%

With salary sacrifice:
- Basic rate effective relief 33.25%
- Higher rate effective rate 43.25%
i.e. difference of 10%

I suspect it is the government's mind to scrap salary sacrifice and introduce at flat rate of tax relief circa. 25%. In any case, I expect they will want to deal with salary sacrifice and tax relief reform at the same time. It is a tricky one and they have been kicking the can down the road for a while now.
 

 



 

Aretnap

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%. 

It's actually closer to 41% for basic rate and 49% for higher rate taxpayers. The fact that a portion of it is labelled "employers' contribution" doesn't stop it being a tax on employment income. 

badmemory

I always thought it was a bit odd that you didn't pay NI on earned income over state pension age although I must confess I didn't complain about the savings.  I've been waiting for them to do something about that for about 15 years.  The massive hit to state pensioners if it is applied to that might at least make some who are entitled to pension credit to claim it.  To suddenly lose 13.5% off part of your state pension would be a big hit especially as it would not be taken off at source.

p00hsticks

badmemory said:

I always thought it was a bit odd that you didn't pay NI on earned income over state pension age although I must confess I didn't complain about the savings.  I've been waiting for them to do something about that for about 15 years.  The massive hit to state pensioners if it is applied to that might at least make some who are entitled to pension credit to claim it.  To suddenly lose 13.5% off part of your state pension would be a big hit especially as it would not be taken off at source.

You appear to be under the impression that State Pension is 'earned income' - it isn't.

badmemory

No I know but they are discussing it, unless they are only talking about ordinary pensions.  I not sure I'd trust them to tell anything like the truth at this early stage though.  They could actually raise the limits too.  Who knows it is all speculation, I doubt we will know the real truth until 5 minutes before it comes into effect.

Ceme3000

Currently no employee pays NI if they earn below £9568 per annum or £184pw.  Assuming they keep the same threshold then no NI would be due if you only received the standard state pension. If you receive a bit more, its only calculated on the difference. 

BuildTheWall

badmemory said:

I always thought it was a bit odd that you didn't pay NI on earned income over state pension age although I must confess I didn't complain about the savings.  I've been waiting for them to do something about that for about 15 years.  The massive hit to state pensioners if it is applied to that might at least make some who are entitled to pension credit to claim it.  To suddenly lose 13.5% off part of your state pension would be a big hit especially as it would not be taken off at source.

State pension by itself wouldn’t attract NI even if taxable. Unless they have other income, those only relying on state pension wouldn’t pay anything. 

Which actually is a good argument to levy NI on all pension income. Poor pensioners won’t pay anything and rich pensioners would pay a decent sum. 

Dazed_and_C0nfused

There are plenty of pensioners getting way more State Pension than the current NI threshold.

QrizB

Dazed_and_C0nfused said:

There are plenty of pensioners getting way more State Pension than the current NI threshold.

... so applying NI to pension payments should raise a decent sum for the Treasury? That's good to know.