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

Sterlingtimes

Janin1992 said:

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.

This is an interesting perspective. Surely, the answer is yes.

Jeremy535897

"62.The Levy will apply to the same population and income as Class 1 (Employee, Employer) and Class 4 (Self-Employed, including partners) National Insurance, and to the main and higher rates. From April 2023 onwards the Levy will also apply to those above State Pension age who are still in employment. The increase will not apply to Class 2 NICs (the flat rate paid by the Self-Employed with profits above the Small Profits Threshold, which is currently £6,515 per year) or Class 3 NICs (voluntary contributions for taxpayers to fill in gaps in their contributions’ records to qualify for benefits)."

From https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1015736/Build_Back_Better-_Our_Plan_for_Health_and_Social_Care.pdf

necsmith

Jeremy535897 said:

"62.The Levy will apply to the same population and income as Class 1 (Employee, Employer) and Class 4 (Self-Employed, including partners) National Insurance, and to the main and higher rates. From April 2023 onwards the Levy will also apply to those above State Pension age who are still in employment."

That answers my query, those in receipt of occupational pensions are not subject to the levy even though it's taxed as earned income.

[Deleted User]

HMRC tax definition- 

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.

Jeremy535897

[Deleted User] said:

HMRC tax definition- 

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.

Indeed. That definition does not apply here, as it is only those subject to class 1 or 4 NIC, or in employment after NIC liabilities cease to apply due to the employee's age.

thelawnet

this is a nice scam for the government.

now they have multiple layers of stealth taxes:

* an extra 1.25% on dividends, which is actually worth 1.67% because of the way dividends are taxed twice
* an extra 1.25% taken off income
* an extra 1.25% on employer's NI, giving a total tax burden of 15.05% on top of gross income, which is therefore equivalent to (15.05/84.95)(13.8/86.2) = 1.71% of income

This is equivalent to 2.96%, but it's then actually more than 3 points on income tax, because of

* fiscal drag on employee's national insurance vs. the personal allowance
* double fiscal fiscal drag on employer's national insurance over and above that

And of course the 2.96% is only paid by employees - company owners pay only 1.67% on their profits, and then of course the people who should be paying for this (the elderly) will be paying nothing in many cases because their income is often tax exempt ISA proceeds.

I bet they thought they were really clever when they came up with this. 

And making it a separate line item was the genius thing, because they will move this up steadily to 2% and 3% in a few years time, which will be worth something like 7 points on income tax.

[Deleted User]

Jeremy535897 said:

[Deleted User] said:

HMRC tax definition- 

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.

Indeed. That definition does not apply here, as it is only those subject to class 1 or 4 NIC, or in employment after NIC liabilities cease to apply due to the employee's age.

Yes - Sorry - I was attempting to highlight the subtle difference.

[Deleted User]

We are heading towards the Irish system of PRSI.

PRSI is a payment made by you and your employees. ... PRSI is the main source of funding for social welfare payments. The total amount paid for an employee in one pay period is called a PRSI contribution. It is made up of the: employer's share, that is, the amount of PRSI you pay on your employee's pay.

Jeremy535897

My experience of the care system going back fifty years (when my grandparents and great grandparents were needing care) is that if there is state provision based on means testing:

• anyone who has the wherewithal to avoid having to rely on the state will do so (private care being much more pleasant). There was a suggestion that somehow this would benefit people like Mick Jagger. There is no way such people would take advantage of it even if they could
• anyone who seeks to rely on the state when they have any assets will have to wait forever to get anything, despite what the rules may or may not say. There will be medical assessments that will decide that elderly incapable people don't need care at all, if the state is supposed to contribute

What is the point of this £100,000 "limit"? Firstly, it seems that not all costs will be paid, so you will end up at £20,000 one day, just a bit later. Secondly, the average house price is now over £250,000, so most homes will have to be sold to pay for care anyway.

Once you are in full time care, your wants are limited. The main beneficiaries of this are not the elderly in care, but their heirs.

kuepper

so actually a 10% plus increase in NI from 12% to 13.5% for class 1 payers