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Minimum NI contribut'n not to affect state pension
KO_Dub
Posts: 13 Forumite
Hi, I wonder can anyone help me please?
I am paying into a workplace pension via salary sacrifice. I have actually increased my payments to more than I can strictly afford. The reason being I have a small lump sum in the bank that I'm using to subsidise my wage, all deliberately and on advice, so that I'm effectively dripping the lump in to my pension but tax effectively?
My concern is that with the low level of tax and NI that I'm now paying it may be affecting the eligibility of my contributions when it comes to claiming state pension.
I was told I was okay, but my taxable income is now only about 5.5k p/a, resulting in me paying not much more than 1k as tax, similar amount in NI, and my employer paying a little more in NI.
My concern comes from someone I know having had financial advice saying they should be earning 19k after deductions (8.5k taxable by my calculations) in order to ensure NI contributions didn’t impact on state pension eligibility.
Can anyone give me definitive figures on minimum sums I need to pay in NI for a year or what should be a minimum taxable income equivalent??
Ps I will not have spent my entire working life in the UK so no, I won't necessarily have more than enough contributions to cover any issues. Thanks for any help.
I am paying into a workplace pension via salary sacrifice. I have actually increased my payments to more than I can strictly afford. The reason being I have a small lump sum in the bank that I'm using to subsidise my wage, all deliberately and on advice, so that I'm effectively dripping the lump in to my pension but tax effectively?
My concern is that with the low level of tax and NI that I'm now paying it may be affecting the eligibility of my contributions when it comes to claiming state pension.
I was told I was okay, but my taxable income is now only about 5.5k p/a, resulting in me paying not much more than 1k as tax, similar amount in NI, and my employer paying a little more in NI.
My concern comes from someone I know having had financial advice saying they should be earning 19k after deductions (8.5k taxable by my calculations) in order to ensure NI contributions didn’t impact on state pension eligibility.
Can anyone give me definitive figures on minimum sums I need to pay in NI for a year or what should be a minimum taxable income equivalent??
Ps I will not have spent my entire working life in the UK so no, I won't necessarily have more than enough contributions to cover any issues. Thanks for any help.
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Comments
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You need to earn just under £6K (52 x £113) gross from one source of employment to get enough NI credits for a full year contribution. You do not need to actually pay any NI as above £113 per week you get credited with NI. https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions0
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If your taxable income is only 5.5k then why are you paying 1k in tax?
What does your payslip show for National Insurance as you're at the level when no NI could be payable either.
There are some other recent threads about qualifying years for State Pension and gov.uk has plenty of info.0 -
If your taxable income is only 5.5k then why are you paying 1k in tax?
Does he mean that he earns £5,000 or so above the PA?0 -
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Ummmm??? let me see nowDazed_and_confused wrote: »If your taxable income is only 5.5k then why are you paying 1k in tax?
Taxable Income is £5,500
Tax rate is 20%
£5,500 x 20% = £1,100
£1,100 is just over £1k
Very easy really
:rotfl::T:rotfl:0 -
My concern comes from someone I know having had financial advice saying they should be earning 19k after deductions (8.5k taxable by my calculations) in order to ensure NI contributions didn!!!8217;t impact on state pension eligibility.
I see similar remarks on many forms not just financial one. "Someone I know etc". If these posters do not believe what these anonymous contacts tell them why do the think some punter on an Internet forum is any more reliable.0 -
drumtochty wrote: »My concern comes from someone I know having had financial advice saying they should be earning 19k after deductions (8.5k taxable by my calculations) in order to ensure NI contributions didn!!!8217;t impact on state pension eligibility.
I see similar remarks on many forms not just financial one. "Someone I know etc". If these posters do not believe what these anonymous contacts tell them why do the think some punter on an Internet forum is any more reliable.
Because they are told 2 different stories and want independent advice, preferably explained straightforwardly, with a link to a Government web site which is what has happened here. Problem, like gee, clarified, and many happy to oblige. Buying NI contributions would cost more than £700 pa. So what’s not to like.0 -
Just make sure the salary sacrificing doesn't take you below the minimum wage.
"A salary sacrifice arrangement can't reduce an employee's cash earnings below the National Minimum Wage rates". https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-payeGood, clean fun....MFW #11 2015 £7657 / £8880
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For a full time worker you need to be well below NMW for it to have an effect on SP, around £3 ph.Just make sure the salary sacrificing doesn't take you below the minimum wage.
"A salary sacrifice arrangement can't reduce an employee's cash earnings below the National Minimum Wage rates". https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye0 -
Yes it's the wrong terminology that has confused people. All your earnings are "taxable". Some of it falls in the personal allowance and so is not taxed, but it's all taxable income.That's how I read it (taxable income of £5.5k), i.e. around £16-17k p.a.
If you're asked what your taxable income for other purposes, such as tax credits, uni loans for your kids, or benefits, you need to include all taxable income including any that falls within your personal allowance.
Non taxable income is stuff that isn't taxxed and doesn't use up your allowance, eg ISA interest, tax credits, some benefits etc.0
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