MSE News: Spring Statement 2022: National Insurance tax cuts and more

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Chancellor Rishi Sunak has announced sweeping changes to National Insurance Contributions that will see a typical employee saving over £330 in the year from July... 

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'Spring Statement 2022: National Insurance tax cuts to save workers £330/yr from July - and everything else from today's announcement'


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  • Skogen
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    What are the consequences for the state pension entitlement of part-time workers now taken out of NICS
  • Pubwalks1000
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    I'm the same Skogen - any clarification if my basic State Pension will be affected by the NI changes due to come in July 2022 as I currently earn 11K per year and I have 28 qualifying years of NI.
    Do I now need to look for a job that earns above £12,570 in order to receive a full basic state pension when I'm 68 (I was born in 1975).

  • molerat
    molerat Posts: 32,009 Forumite
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    You don't need to pay NI to receive NI credits, anyone earning a regular wage of £121 per week would get a full year without paying 1p in NI.
  • SiliconChip
    SiliconChip Posts: 1,381 Forumite
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    molerat said:
    You don't need to pay NI to receive NI credits, anyone earning a regular wage of £121 per week would get a full year without paying 1p in NI.

    Yes, but the point is having raised the Primary Threshold by £3,000 we do not yet know whether they also plan to raise the LEL by a similar amount, which would hit millions of low paid people who currently receive NI credits. As stated in the other thread MSE have put this question to the Treasury and will post the answer here, they haven't yet done so so we can only speculate at the moment.
  • MSE_Helen_K
    MSE_Helen_K Posts: 159 MSE Staff
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    edited 24 March 2022 at 6:11PM
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    Skogen said:
    What are the consequences for the state pension entitlement of part-time workers now taken out of NICS
    Hi there, we've added this into our specific story on the NICs shake-up, which you can read here: https://www.moneysavingexpert.com/news/2022/03/spring-statement-2022-national-insurance-rise-tax-cut-/

    To summarise [EDIT - this has been updated as of 24 March by me to make it clearer]: 

    How the shake-up affects state pension payments and benefits entitlement

    Paying national insurance builds up your entitlement to certain benefits, such as the state pension. If you don't earn enough to pay national insurance, however, you can still get credits towards the state pension if you earn over a certain amount. (You can also get credits if you're not working, for example, if you're a carer or you're on certain benefits.) It works differently depending on whether you're an employee or self-employed: 
    For employees, there's no change to this 'lower earnings limit', which is the point at which people gain a national insurance credit. From 6 April 2022, employees earning above £6,396 will qualify for a credit and they'll pay national insurance at 13.25% on earnings from £9,880. Then from 6 July, employees earning from £6,396 will continue to qualify for a credit while national insurance at 13.25% will be due on earnings from £12,570. 

    For the self-employed it's different. Currently, those earning between £6,515 and £9,568 (between the 'small-profits threshold' and the 'lower profits limit') can gain entitlement to credits from the small-profits threshold. National insurance is due at a flat rate of £3.05 a week from £6,515, while any earnings above £9,568 are also subject to 9% national insurance.

    From 6 April 2022, the weekly flat-rate contribution is being scrapped for those earning between the small profits threshold and the lower profits limit - though you'll still earn credits from the increased small-profits threshold of £6,725. Instead the weekly flat-rate contribution, which will rise to £3.15, will be due from the increased lower profits limit of £11,908. National insurance at an increased rate of 10.25% will also be due from this point.

    Why don't self-employed people have a £12,570 threshold for national insurance like employees? Well, they are benefiting from a higher threshold from April 2022, three months earlier than employees. So the Government has recalculated the lower profits limit to reflect that.

  • taylornj
    taylornj Posts: 297 Forumite
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    Um take something away then should we feel grateful it's given back. A zero cost bribe to win favour from the electorate from the Chancellor seeking to be the next PM, no wonder the current PM was giggling behind the Chancellor.

    Now I'm a pensioner receiving dividends, so where's my increased dividend allowance, the other form of National Insurance being increased by 1.25%, that's a 16.67% increase a lot more than the other National Insurance increases.

    Guess there also the 1% tax cut, promised in the future, but as many know, promises like the triple lock aren't always kept.

    Seems the Chancellor has a habit of leaving out certain groups, as a Pensioner, that can't demand increase in wages, cost of living / inflation is where it will hit hardest, only those made destitute will get help from the extra given to councils.

    I see little to cheer, or little reason to even consider voting for this Chancellor, a few years suffering and the elections bribe will come to late for many. It's will however be a short lived reprieve, soon to return to the ranks of the forgotten.
  • Stuart_W
    Stuart_W Posts: 1,737 Forumite
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    Joseph Rowntree Foundation have summed up nicely who, when inflation is taken into account, are suffering the biggest income change. The poorest become poorer. This is what leveling up looks like is it?
  • badmemory
    badmemory Posts: 7,887 Forumite
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    Why couldn't he announce the change to the LEL at the same time?  I'll answer that myself.  Because he is going to raise it on the QT & knows there would have been an outcry because of the lower paid who will no longer be entitled to a state pension.
  • zagfles
    zagfles Posts: 20,359 Forumite
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    edited 24 March 2022 at 7:36PM
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    Stuart_W said:

    Joseph Rowntree Foundation have summed up nicely who, when inflation is taken into account, are suffering the biggest income change. The poorest become poorer. This is what leveling up looks like is it?
    Benefits are mostly going up by "inflation", it's just the inflation measure, as always, lags 6 months. See https://www.gov.uk/government/publications/benefit-and-pension-rates-2022-to-2023/proposed-benefit-and-pension-rates-2022-to-2023
    So they're mostly increasing by last September's CPI which was 3.1%, whereas current inflation rate is much higher. If inflation drops (as surely it will) then the graph will be inverted next year, benefits will increase by more than current inflation. I'm sure they'll then tell us that the poor are getting richer...
    Plus they don't seem to have accounted for the freezing of the income tax personal allowance or the higher rate theshold, these will have a significant negative effect on those who earn enough to use them, but zero effect on those who don't. Nor the council tax discount or energy discount "loan" which will benefit those on lower incomes more. It looks a rather selective analysis.

  • zagfles
    zagfles Posts: 20,359 Forumite
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    badmemory said:
    Why couldn't he announce the change to the LEL at the same time?  I'll answer that myself.  Because he is going to raise it on the QT & knows there would have been an outcry because of the lower paid who will no longer be entitled to a state pension.
    Because there is no change to the LEL, except the usual inflation increase. It's going up from £120 to £123pw in April as usual in line with last Sept inflation. That's it. Don't look for silly conspiracy theories where none exist.
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