National Insurance contributions to rise by 1.25% points from April 2022 to fund social care costs

Grumpy_chap

necsmith said:

FatherTireseus said:

necsmith said:

"It will become a separate tax on earned income from 2023" [BBC report] - Does this mean that the levy will apply to occupational pensions from 2023?

As far as I know,  pension income does not count towards the definition of earned income,  so based on my initial reading, the answer to your question is no. I read it as, rather than being lumped in with NI as a deduction on your payslip from 2023 it will be shown as a separate line item. A bit like the social care precept is shown separately on your council tax bill. I'm sure more details and views will be forthcoming if I have read it incorrectly. 

Earned Income

Earned income is any payment an individual receives as a result of an employment, from a trade, profession or vocation they have, or from a pension they receive.

gov.uk

I read it differently, but the devil will be in the detail.

Thank you.

That does seem to be a different definition to the usual "earned income" used for NI, which does exclude pensions received.  I wonder whether it will include state pensions received also?

lincroft1710

biscan25 said:

- Not paid by pensioners. The people still in employment after SPA are those that cannot afford to retire.

Not necessarily true. Some people just do not want to stop working

[Deleted User]

Grumpy_chap said:

necsmith said:

FatherTireseus said:

necsmith said:

"It will become a separate tax on earned income from 2023" [BBC report] - Does this mean that the levy will apply to occupational pensions from 2023?

As far as I know,  pension income does not count towards the definition of earned income,  so based on my initial reading, the answer to your question is no. I read it as, rather than being lumped in with NI as a deduction on your payslip from 2023 it will be shown as a separate line item. A bit like the social care precept is shown separately on your council tax bill. I'm sure more details and views will be forthcoming if I have read it incorrectly. 

Earned Income

Earned income is any payment an individual receives as a result of an employment, from a trade, profession or vocation they have, or from a pension they receive.

gov.uk

I read it differently, but the devil will be in the detail.

Thank you.

That does seem to be a different definition to the usual "earned income" used for NI, which does exclude pensions received.  I wonder whether it will include state pensions received also?

The ‘separate tax’ designation could well make the argument irrelevant - will that apply to all income? 

nigelbb

The reports that I have seen only refer to working pensioners being subject to the 1.25% levy on their earnings from April 2024 not all pensioners on their pensions. 

Janin1992

Am I right that for those of us who sacrifice more than 50% of salary this change is a net positive, I will get more from my employer in additional pension contributions than I will lose on a minimum wage I currently get.

Thrugelmir

biscan25 said:

This is an utterly ridiculous policy, for a number of reasons:
- Generationally unfair
- Disproportionately affects lower earners, as NI is a flat tax
- Not paid by pensioners. The people still in employment after SPA are those that cannot afford to retire.
-Not paid on rental income - a glaring omission, but I suspect this will be addressed in subsequent amendments
- Actually a 2.5% tax increase. Whereas people like myself will have to meet the employer cost straight away, as I am a contractor employed within an umbrella company, normal salaried people will have it passed on through reduced future payrises.
- A direct tax on jobs, at possibly the worst possible time.

In an ideal world I think that care costs should be met via a tax on wealth, since this is both the most fair and efficient. Alternatively using income tax the share of cost could be met by those more able to bear it.

Today was not a budget announcement. One suspects there's far more to follow of a general nature in the months ahead. Finally a grown up action to address an issue that politicians of all colours have kicked down the road for far too long.  

Jeremy535897

Looking at the MSE example, it would seem that the policy means that employee contributions rise from 12% to 13.25%, and from 2% to 3.25%. Employer NI contributions rise from 13.8% to 15.05%. There will presumably be similar rises in class 4 NIC. Dividend tax also rises by 1.25% (presumably to stop shareholder directors avoiding the increase, but no doubt it will apply to all dividends). There is no NIC on pensions so they should be unaffected, although people will pay the 1.25% even if they work after liability to NIC ceases due to age.

MSE_Helen_K

Hi all just to confirm we have lots of ques in with the Gov on this issue and no details yet. In particular, we're checking whether this levy will apply to pension income and to self-employed NICs and whether this increase is definitely a percentage point one (I believe it is but it's not 100% clear). We'll update the news story as soon as we know more. 

NedS

[Deleted User] said:

bluphoto said:

I see bbc have changed the language from 1.25% to 1.25 percentage points, which is an entirely different (but at least clearer) thing.

It is - the devil is on the detail e.g.

’ People who work after the state pension age will also be told to pay 1.25 per cent’

Currently they pay 0%. That’s an infinitesimal increase!

Could be worse - I was expecting pensioners to be told they will now be subject to the full amount of NI on any earned income (not pension income). So to get away with just paying the 1.25% levy seems to me like they got off lightly.

Jeremy535897

NedS said:

[Deleted User] said:

bluphoto said:

I see bbc have changed the language from 1.25% to 1.25 percentage points, which is an entirely different (but at least clearer) thing.

It is - the devil is on the detail e.g.

’ People who work after the state pension age will also be told to pay 1.25 per cent’

Currently they pay 0%. That’s an infinitesimal increase!

Could be worse - I was expecting pensioners to be told they will now be subject to the full amount of NI on any earned income (not pension income). So to get away with just paying the 1.25% levy seems to me like they got off lightly.

I suspect purdeyoaten meant infinite (in percentage terms) rather than infinitesimal, but I agree it looks like, at first sight, they got off lightly.