tax and ni contributions on early retirement

jenny45

sorry for another thread but trying to calculate earning etc if I retired  early

Am I right in saying that if I take my deferred civil service pension early I do not pay contributions on it?  I am going to work part time and know that pension income is taxable and will affect tax paid with earnings

What I wanted to check is do ni contributions work the same way as tax income works as for example
earnings + pension - level before contributions applied = total  and take 8% off for yearly contributions to be paid

hope this makes sense as just trying to calculate how much I would have each month 

thanks

Dazed_and_C0nfused

jenny45 said:

sorry for another thread but trying to calculate earning etc if I retired  early

Am I right in saying that if I take my deferred civil service pension early I do not pay contributions on it?  I am going to work part time and know that pension income is taxable and will affect tax paid with earnings

What I wanted to check is do ni contributions work the same way as tax income works as for example
earnings + pension - level before contributions applied = total  and take 8% off for yearly contributions to be paid

hope this makes sense as just trying to calculate how much I would have each month 

thanks

No, you don't pay National Insurance on pension income.

hugheskevi

jenny45 said:

Am I right in saying that if I take my deferred civil service pension early I do not pay contributions on it? 

You do not pay National Insurance contributions on pension income.

jenny45 said:

What I wanted to check is do ni contributions work the same way as tax income works as for example
earnings + pension - level before contributions applied = total  and take 8% off for yearly contributions to be paid

National Insurance contributions are calculated in a different way to income tax. National Insurance is calculated over an individual pay period - for example monthly if that is your pay frequency - whereas income tax is calculated across the whole tax year.

Assuming monthly pay (thresholds for other pay periods are at this link), your National Insurance contributions each month are:

Nothing on the first £1,048 of gross earnings
8% on gross earnings between £1,048 and £4,189
2% on gross earnings over £4,189

jenny45

hugheskevi said:

jenny45 said:

Am I right in saying that if I take my deferred civil service pension early I do not pay contributions on it? 

You do not pay National Insurance contributions on pension income.

jenny45 said:

What I wanted to check is do ni contributions work the same way as tax income works as for example
earnings + pension - level before contributions applied = total  and take 8% off for yearly contributions to be paid

National Insurance contributions are calculated in a different way to income tax. National Insurance is calculated over an individual pay period - for example monthly if that is your pay frequency - whereas income tax is calculated across the whole tax year.

Assuming monthly pay (thresholds for other pay periods are at this link), your National Insurance contributions each month are:

Nothing on the first £1,048 of gross earnings
8% on gross earnings between £1,048 and £4,189
2% on gross earnings over £4,189

can i just clairfy   I have a small penion of £400 and monthly wages of £1000 are they added together and what is over the £1048 is taken at 8% off earnings 

thanks

Dazed_and_C0nfused

jenny45 said:

hugheskevi said:

jenny45 said:

Am I right in saying that if I take my deferred civil service pension early I do not pay contributions on it? 

You do not pay National Insurance contributions on pension income.

jenny45 said:

What I wanted to check is do ni contributions work the same way as tax income works as for example
earnings + pension - level before contributions applied = total  and take 8% off for yearly contributions to be paid

National Insurance contributions are calculated in a different way to income tax. National Insurance is calculated over an individual pay period - for example monthly if that is your pay frequency - whereas income tax is calculated across the whole tax year.

Assuming monthly pay (thresholds for other pay periods are at this link), your National Insurance contributions each month are:

Nothing on the first £1,048 of gross earnings
8% on gross earnings between £1,048 and £4,189
2% on gross earnings over £4,189

can i just clairfy   I have a small penion of £400 and monthly wages of £1000 are they added together and what is over the £1048 is taken at 8% off earnings 

thanks

No, pension income is ignored for National Insurance purposes.

On monthly wages of £1,000 you won't pay any National Insurance but will be credited with a qualifying month each time you earn £1,000.

This may be useful for State Pension purposes, especially as you are under transitional rules.

MallyGirl

No NI on pension income so the £400 will be excluded for NI purposes and you would pay no NI on the £1000 salary

jenny45

Dazed_and_C0nfused said:

jenny45 said:

hugheskevi said:

jenny45 said:

Am I right in saying that if I take my deferred civil service pension early I do not pay contributions on it? 

You do not pay National Insurance contributions on pension income.

jenny45 said:

What I wanted to check is do ni contributions work the same way as tax income works as for example
earnings + pension - level before contributions applied = total  and take 8% off for yearly contributions to be paid

National Insurance contributions are calculated in a different way to income tax. National Insurance is calculated over an individual pay period - for example monthly if that is your pay frequency - whereas income tax is calculated across the whole tax year.

Assuming monthly pay (thresholds for other pay periods are at this link), your National Insurance contributions each month are:

Nothing on the first £1,048 of gross earnings
8% on gross earnings between £1,048 and £4,189
2% on gross earnings over £4,189

can i just clairfy   I have a small penion of £400 and monthly wages of £1000 are they added together and what is over the £1048 is taken at 8% off earnings 

thanks

No, pension income is ignored for National Insurance purposes.

On monthly wages of £1,000 you won't pay any National Insurance but will be credited with a qualifying month each time you earn £1,000.

This may be useful for State Pension purposes, especially as you are under transitional rules.

on checking pension forecast on government gateway it says I have qualified for full pension if I ever make it to 2037 lol  I was in serps to 2003 when I left civil service  but have been working since then and paying contributions.

my pension forecast says I have reached full state pension and can not get anymore (been like that for past 3 years)  so that should be ok even if for next few years I do not pay contributions.

honestly never thought there was so much to think about 

xylophone

qualified for full pension if I ever make it to 2037 

You mentioned that you are already 58 so SPA will be reached in 2033?

jenny45

xylophone said:

qualified for full pension if I ever make it to 2037 

You mentioned that you are already 58 so SPA will be reached in 2033?

yes you are right ..sorry so many figures running through head lol