There are slightly different rules regarding the National Insurance exemption from state pension age, depending on whether a person is employed or self-employed. People who are employed, for instance, stop paying Class 1 National Insurance when they reach state pension age.
Self-employed people stop paying Class 2 National Insurance when they reach state pension age, and Class 4 National Insurance from April 6 – with this being the start of the tax year – after reaching state pension age.
The coronavirus pandemic, and the unprecedented public spending in response to it, has prompted many to speculate about what Chancellor of the Exchequer Rishi Sunak could announce at the Spring Budget on March 3.
The Chancellor has agreed to stick with a Conservative Manifesto Commitment, referred to as the tax triple lock, which would stop a rise in Income Tax, National Insurance and Value Added Tax (VAT), the Financial Times reported yesterday.
However with huge spending having already incurred to support jobs and businesses during the ongoing Covid crisis, and a stated objective to return the nation’s finances to a sustainable footing in the longer term, it may be the Chancellor looks elsewhere to cut the deficit, raising the prospect of increases in other taxes or cuts in allowances and tax reliefs.
Aegon’s Steven Cameron has commented on the consequences for savers and investors if the Chancellor does stick with the manifesto ‘triple tax lock’ commitment.
The Pensions Director at Aegon said: “The huge amounts being spent protecting jobs and businesses throughout the pandemic have been a welcome support for millions, but the sheer size of the deficit means it’s not a case of if, but when and how the Chancellor will increase taxes to begin to return the nation’s finances to a sounder long term footing.
“If as is being reported the Chancellor has agreed to maintain the Tory Manifesto commitment of a ‘tax triple lock’, he’ll be unable to increase rates of income tax, national insurance or VAT, which raises the prospect of increases in other taxes or cuts in allowances and reliefs.
“This could have wide reaching implications for savings, investments and pensions.
“A report prepared by the Office of Tax Simplification at the Chancellor’s request into Capital Gains Tax (CGT) created speculation of an increase in the rate of CGT or a reduction in allowances.
“This could impact those investing outside tax favoured ISA and pensions wrappers as well as second home owners.
“It could also adversely affect business owners who sell their businesses although the Chancellor could avoid discouraging entrepreneurship through more generous business asset disposal relief.
“There’s also ongoing speculation that Rishi might change the tax breaks on offer to those saving in pensions.