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  • FIRST POST
    • KO Dub
    • By KO Dub 13th Feb 18, 6:53 PM
    • 3Posts
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    KO Dub
    Minimum NI contribut'n not to affect state pension
    • #1
    • 13th Feb 18, 6:53 PM
    Minimum NI contribut'n not to affect state pension 13th Feb 18 at 6:53 PM
    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 didnít 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.
Page 1
    • molerat
    • By molerat 13th Feb 18, 7:12 PM
    • 18,587 Posts
    • 12,739 Thanks
    molerat
    • #2
    • 13th Feb 18, 7:12 PM
    • #2
    • 13th Feb 18, 7:12 PM
    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-contributions
    Last edited by molerat; 14-02-2018 at 9:41 AM.
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    • Dazed and confused
    • By Dazed and confused 13th Feb 18, 7:21 PM
    • 2,558 Posts
    • 1,228 Thanks
    Dazed and confused
    • #3
    • 13th Feb 18, 7:21 PM
    • #3
    • 13th Feb 18, 7:21 PM
    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.
    • xylophone
    • By xylophone 13th Feb 18, 7:45 PM
    • 25,371 Posts
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    xylophone
    • #4
    • 13th Feb 18, 7:45 PM
    • #4
    • 13th Feb 18, 7:45 PM
    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?
    • GunJack
    • By GunJack 13th Feb 18, 11:11 PM
    • 10,117 Posts
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    GunJack
    • #5
    • 13th Feb 18, 11:11 PM
    • #5
    • 13th Feb 18, 11:11 PM
    Does he mean that he earns £5,000 or so above the PA?
    Originally posted by xylophone
    That's how I read it (taxable income of £5.5k), i.e. around £16-17k p.a.
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    • capital0ne
    • By capital0ne 13th Feb 18, 11:39 PM
    • 475 Posts
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    capital0ne
    • #6
    • 13th Feb 18, 11:39 PM
    • #6
    • 13th Feb 18, 11:39 PM
    If your taxable income is only 5.5k then why are you paying 1k in tax?
    Originally posted by Dazed and confused
    Ummmm??? let me see now
    Taxable Income is £5,500
    Tax rate is 20%
    £5,500 x 20% = £1,100

    £1,100 is just over £1k

    Very easy really
    • drumtochty
    • By drumtochty 13th Feb 18, 11:58 PM
    • 104 Posts
    • 50 Thanks
    drumtochty
    • #7
    • 13th Feb 18, 11:58 PM
    • #7
    • 13th Feb 18, 11:58 PM
    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.
    • OldBeanz
    • By OldBeanz 14th Feb 18, 3:16 AM
    • 739 Posts
    • 567 Thanks
    OldBeanz
    • #8
    • 14th Feb 18, 3:16 AM
    • #8
    • 14th Feb 18, 3:16 AM
    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.
    Originally posted by drumtochty
    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 whatís not to like.
    • Wirenth
    • By Wirenth 14th Feb 18, 12:56 PM
    • 686 Posts
    • 800 Thanks
    Wirenth
    • #9
    • 14th Feb 18, 12:56 PM
    • #9
    • 14th Feb 18, 12:56 PM
    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-paye
    Good, clean fun....
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    • molerat
    • By molerat 14th Feb 18, 1:05 PM
    • 18,587 Posts
    • 12,739 Thanks
    molerat
    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-paye
    Originally posted by Wirenth
    For a full time worker you need to be well below NMW for it to have an effect on SP, around £3 ph.
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    • zagfles
    • By zagfles 14th Feb 18, 1:17 PM
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    zagfles
    That's how I read it (taxable income of £5.5k), i.e. around £16-17k p.a.
    Originally posted by GunJack
    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.

    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.
    • zagfles
    • By zagfles 14th Feb 18, 1:20 PM
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    zagfles
    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.
    Originally posted by drumtochty
    Because there are lots of us, not just one person, and references can be posted to official govt info. Rather than just rely on one person, whoever they are.

    I'd trust this forum to give correct advice over any single financial adviser.
    • KO Dub
    • By KO Dub 14th Feb 18, 9:29 PM
    • 3 Posts
    • 0 Thanks
    KO Dub
    As one of "these posters" if you would like more precise info on "someone I know" it's a pals girlfriend who has received recent financial advice, whereas I received contradictory info about 18months ago from the HR dept at work. The reason I'm asking on here is that there seems to be several very knowledgeable people happy to help and I'm seeking clarification. Not sure what exactly your issue is but perhaps best not to say anything if you can't help? Ta
    • KO Dub
    • By KO Dub 14th Feb 18, 9:41 PM
    • 3 Posts
    • 0 Thanks
    KO Dub
    Apologies, I didnít realise my question was unclear due to terminology used. I would (obviously incorrectly) call taxable income; that which is earned above 11.5k personal allowance but with the exception of my salary sacrifice amount which is non-taxable?
    But to try and clarify...
    I earn about 27k. I pay about 9.5k sal sacrifice, leaving about 5.5-6k taxable when my personal allowance of 11.5k is taken into account.
    These are loose figures as there are some variables. Thanks
    • JaneMick
    • By JaneMick 16th Feb 18, 12:07 PM
    • 1 Posts
    • 0 Thanks
    JaneMick
    Doesn't seem right to penalise low earners!
    I'm hoping people in this thread might know if I have my facts right and whether MSE or anybody is lobbying the Government etc to change things? This is my first post! I earn under £490 (but more than £113 for 4 weeks a month) - I get paid monthly so no NIC contributions are paid towards my state pension. My employer will not pay me weekly. This is so wrong and I cannot afford £14+ a week to pay the missing weeks at the end of the financial year. I am a carer on my non-working days - about 20 odd hours a week and I am pleased to have found out that I can get my NIC credits paid through this route (hopefully). I also have had NIC credits in the past when claiming JSA, but having to travel 10 miles each way on the bus meant this cost me £6 and took half a day - so that wasn't ideal. HMRC need to review this monthly pay vs weekly pay NIC credit system - it worries me how many people out there are losing out and don't realise.
    • zagfles
    • By zagfles 16th Feb 18, 4:57 PM
    • 13,016 Posts
    • 11,056 Thanks
    zagfles
    I'm hoping people in this thread might know if I have my facts right and whether MSE or anybody is lobbying the Government etc to change things? This is my first post! I earn under £490 (but more than £113 for 4 weeks a month) - I get paid monthly so no NIC contributions are paid towards my state pension. My employer will not pay me weekly. This is so wrong and I cannot afford £14+ a week to pay the missing weeks at the end of the financial year. I am a carer on my non-working days - about 20 odd hours a week and I am pleased to have found out that I can get my NIC credits paid through this route (hopefully). I also have had NIC credits in the past when claiming JSA, but having to travel 10 miles each way on the bus meant this cost me £6 and took half a day - so that wasn't ideal. HMRC need to review this monthly pay vs weekly pay NIC credit system - it worries me how many people out there are losing out and don't realise.
    Originally posted by JaneMick
    Don't understand what you mean. What difference would paying you weekly make? If you get under £490 a month then that's under £113 a week. So you wouldn't get NI credits either way.

    If you get Working Tax Credits they'll count for NI credits towards the state pension. See https://revenuebenefits.org.uk/tax-credits/guidance/how-much-can-your-client-get/national-insurance-credits/
    • Esox
    • By Esox 16th Feb 18, 5:10 PM
    • 20 Posts
    • 19 Thanks
    Esox
    Don't understand what you mean. What difference would paying you weekly make? If you get under £490 a month then that's under £113 a week. So you wouldn't get NI credits either way.

    If you get Working Tax Credits they'll count for NI credits towards the state pension. See https://revenuebenefits.org.uk/tax-credits/guidance/how-much-can-your-client-get/national-insurance-credits/
    Originally posted by zagfles
    Class 1 National Insurance thresholds 2017 to 2018
    Lower Earnings Limit (LEL) £113 per week, £490 per month, £5,876 per year

    Presume if any of the above thresholds are exceeded then you are ok?

    https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2017-to-2018
    Last edited by Esox; 16-02-2018 at 5:19 PM.
    • zagfles
    • By zagfles 16th Feb 18, 7:00 PM
    • 13,016 Posts
    • 11,056 Thanks
    zagfles
    Class 1 National Insurance thresholds 2017 to 2018
    Lower Earnings Limit (LEL) £113 per week, £490 per month, £5,876 per year

    Presume if any of the above thresholds are exceeded then you are ok?

    https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2017-to-2018
    Originally posted by Esox
    AIUI - if you get paid weekly, you use the weekly thresholds and only count weeks in which you earnt the LEL or over. Also don't count any earnings above the UEL. If that adds up to more than £5876 in a year then it's a qualifying year.

    Any week where you earned under £113 doesn't count at all. So for instance if you earn £113 for 52 weeks it's a qualifying year. But if you earnt £113 for 50 weeks, £112 one week and £200 one week, it's not a qualifying year! Because the £112 week doesn't count at all, your total is £5850.

    Same for monthly except use £490 a month.

    Think annually is only used for self employed and directors.

    That's my understanding anyway...it's stupidly and unnecessarily complicated. There are loads of other anomalies like someone earning £200 a week for half the year and nothing for the other half pays NI but gets no credits, whereas someone earning £120 a week for the whole year doesn't pay any NI but does get credits!

    The govt did promise ages to ago to address these sorts of anomalies by harmanising the operation of NI with tax, but seem to have kicked it into the long grass...
    • greenglide
    • By greenglide 16th Feb 18, 7:01 PM
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    greenglide
    Presume if any of the above thresholds are exceeded then you are ok?
    You have to be paid a minimum of £5,856 in a tax year for it to be aqualifying year. This is an average of £113 a week or £490 a month but this is pretty much irrelevant.

    The £5,856 in a year is the key.

    Edit to add : this assumes that the person does not exceed the Upper Earnings limit in any pay period which seems unlikely.
    Last edited by greenglide; 16-02-2018 at 7:04 PM. Reason: extra
    • zagfles
    • By zagfles 16th Feb 18, 7:10 PM
    • 13,016 Posts
    • 11,056 Thanks
    zagfles
    You have to be paid a minimum of £5,856 in a tax year for it to be aqualifying year. This is an average of £113 a week or £490 a month but this is pretty much irrelevant.

    The £5,856 in a year is the key.

    Edit to add : this assumes that the person does not exceed the Upper Earnings limit in any pay period which seems unlikely.
    Originally posted by greenglide
    £5876. And note the point above about any earnings under the LEL in any pay period. As I understand it those earnings don't count at all.
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