Fix Class 2 NICs: 2023-24 rate, the 2022-23 lower profits threshold, and the small profits threshold

changelog.d/1887.fixed.md

@@ -0,0 +1 @@
+- Fix Class 2 National Insurance for 2015-16 to 2023-24 against s.11 SSCBA 1992: charge £3.45 a week in 2023-24; from 2022-23 charge only profits above the Class 2 lower profits threshold (£11,908, then £12,570), with profits from the small profits threshold up to it treated as paid; keep the small profits threshold at £6,725 in 2023-24 and 2024-25 and correct it to £5,965 in 2015-16 and 2016-17; date the abolition 6 April 2024. Every value now cites its amending instrument.

docs/book/policy/model-baseline.md

@@ -22,7 +22,7 @@ Annual benefit uprating applied 4.1% increases to state pensions and 1.7% to wor
 
 ### Autumn Statement 2023
 
-The government announced further National Insurance cuts, reducing the [employee main rate from 10% to 8%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml#L22-L27) and the [self-employed Class 4 rate from 9% to 6%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_4/rates/main.yaml#L16-L21) in fiscal year 2024-25. [Class 2 National Insurance contributions were abolished](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_2/flat_rate.yaml#L14-L19) for self-employed people, with the flat rate set to £0 in fiscal year 2024-25.
+The government announced further National Insurance cuts, reducing the [employee main rate from 10% to 8%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml#L22-L27) and the [self-employed Class 4 rate from 9% to 6%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_4/rates/main.yaml#L16-L21) in fiscal year 2024-25. [Class 2 National Insurance contributions were abolished](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_2/flat_rate.yaml#L51-L56) for self-employed people, with the flat rate set to £0 in fiscal year 2024-25.
 
 ### Capital gains tax changes (Autumn Budget 2024)
 

policyengine_uk/parameters/gov/hmrc/national_insurance/class_2/flat_rate.yaml

@@ -1,25 +1,65 @@
-description: Flat rate National Insurance contribution for self-employed earners.
+description: Weekly Class 2 National Insurance contribution that self-employed earners are liable to pay under section 11(2) of the Social Security Contributions and Benefits Act 1992. Compulsory Class 2 ended on 6 April 2024; voluntary Class 2 is not modelled.
 values:
-  2015-04-01: 2.8
-  2017-04-01: 2.85
-  2018-04-01: 2.95
-  2019-04-01: 3
-  2020-04-01: 3.05
+  2015-04-06:
+    value: 2.8
+    metadata:
+      reference:
+        - title: National Insurance Contributions Act 2015 Sch 1 para 3 (substituting s 11(2) of the Social Security Contributions and Benefits Act 1992)
+          href: https://www.legislation.gov.uk/ukpga/2015/5/schedule/1/paragraph/3/enacted
+        - title: Social Security Contributions and Benefits Act 1992 s 11(2) (as at 6 April 2016, unchanged for 2016-17)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2016-04-06
+  2017-04-06:
+    value: 2.85
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2017 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2017/415/regulation/3/made
+  2018-04-06:
+    value: 2.95
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2018 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2018/337/regulation/3/made
+  2019-04-06:
+    value: 3
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2019 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2019/262/regulation/3/made
+  2020-04-06:
+    value: 3.05
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2020/299/regulation/3/made
+        - title: Social Security Contributions and Benefits Act 1992 s 11(2) (as at 6 April 2021, unchanged for 2021-22)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2021-04-06
   2022-04-06:
     value: 3.15
     metadata:
       reference:
-        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022(3)(a)
-          href: https://www.legislation.gov.uk/uksi/2022/232/regulation/3/made#regulation-3-a
-  2024-01-01:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2022/232/regulation/3/made
+  2023-04-06:
+    value: 3.45
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2023 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2023/236/regulation/3/made
+        - title: Social Security Contributions and Benefits Act 1992 s 11(2) (as at 6 April 2023)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2023-04-06
+  2024-04-06:
     value: 0
     metadata:
       reference:
-        - title: "Autumn Statement 2023: National Insurance Factsheet"
-          href: https://www.gov.uk/government/publications/autumn-statement-2023-national-insurance-factsheet/autumn-statement-2023-national-insurance-factsheet
+        - title: National Insurance Contributions (Reduction in Rates) Act 2023 s 3(1)(a) and (3) (omitting s 11(2) of the Social Security Contributions and Benefits Act 1992 from 6 April 2024)
+          href: https://www.legislation.gov.uk/ukpga/2023/57/section/3/enacted
 metadata:
   unit: currency-GBP
+  period: week
   label: NI class 2 flat rate
   reference:
-    - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/882271/Table-a4.pdf
-    - https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions
+    - title: Social Security Contributions and Benefits Act 1992 s 11
+      href: https://www.legislation.gov.uk/ukpga/1992/4/section/11
+    - title: "GOV.UK | Rates and allowances: National Insurance contributions"
+      href: https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

policyengine_uk/parameters/gov/hmrc/national_insurance/class_2/lower_profits_threshold.yaml

@@ -0,0 +1,21 @@
+description: Lower profits threshold for Class 2 National Insurance contributions under section 11(4)(a) of the Social Security Contributions and Benefits Act 1992. In 2022-23 and 2023-24 self-employed earners were liable for Class 2 only on profits above it. Section 11(4)(a) was omitted from 6 April 2024, when compulsory Class 2 ended; the 2023-24 value applies to reforms that restore a Class 2 rate.
+values:
+  2022-04-06:
+    value: 11_908
+    metadata:
+      reference:
+        - title: The Social Security (Class 2 National Insurance Contributions Increase of Threshold) Regulations 2022 reg 2(3)
+          href: https://www.legislation.gov.uk/uksi/2022/1329/regulation/2/made
+  2023-04-06:
+    value: 12_570
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2023 reg 3(b)
+          href: https://www.legislation.gov.uk/uksi/2023/236/regulation/3/made
+metadata:
+  unit: currency-GBP
+  period: year
+  label: NI class 2 lower profits threshold
+  reference:
+    - title: Social Security Contributions and Benefits Act 1992 s 11(2), (4) and (5A) (as at 6 April 2023)
+      href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2023-04-06

policyengine_uk/parameters/gov/hmrc/national_insurance/class_2/lower_profits_threshold_applies.yaml

@@ -0,0 +1,21 @@
+description: Class 2 National Insurance liability starts above the lower profits threshold rather than at the small profits threshold. From 2022-23 profits from the small profits threshold up to the lower profits threshold are treated as paid.
+values:
+  2015-04-06:
+    value: false
+    metadata:
+      reference:
+        - title: Social Security Contributions and Benefits Act 1992 s 11(2) (as at 6 April 2021)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2021-04-06
+  2022-04-06:
+    value: true
+    metadata:
+      reference:
+        - title: The Social Security (Class 2 National Insurance Contributions Increase of Threshold) Regulations 2022 regs 1 and 2(2)
+          href: https://www.legislation.gov.uk/uksi/2022/1329/regulation/2/made
+metadata:
+  unit: bool
+  period: year
+  label: Class 2 liability starts above the lower profits threshold
+  reference:
+    - title: Social Security Contributions and Benefits Act 1992 s 11(2), (5A) and (5B) (as at 6 April 2023)
+      href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2023-04-06

policyengine_uk/parameters/gov/hmrc/national_insurance/class_2/small_profits_threshold.yaml

@@ -1,35 +1,80 @@
-description: Small profits National Insurance threshold for self-employed earners.
+description: Small profits threshold for Class 2 National Insurance contributions under section 11(4) of the Social Security Contributions and Benefits Act 1992. Before 2022-23 self-employed earners with profits at or above it were liable for Class 2; in 2022-23 and 2023-24 profits from this threshold up to the lower profits threshold were treated as paid.
 values:
-  2015-04-06: 3_965
-  2017-04-06: 6_025
-  2018-04-06: 6_205
-  2019-04-06: 6_365
-  2020-04-06: 6_475
-  2021-04-06: 6_515
+  2015-04-06:
+    value: 5_965
+    metadata:
+      reference:
+        - title: National Insurance Contributions Act 2015 Sch 1 para 3 (substituting s 11(4) of the Social Security Contributions and Benefits Act 1992)
+          href: https://www.legislation.gov.uk/ukpga/2015/5/schedule/1/paragraph/3/enacted
+        - title: Social Security Contributions and Benefits Act 1992 s 11(4) (as at 6 April 2016, unchanged for 2016-17)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2016-04-06
+  2017-04-06:
+    value: 6_025
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2017 reg 3(b)
+          href: https://www.legislation.gov.uk/uksi/2017/415/regulation/3/made
+  2018-04-06:
+    value: 6_205
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2018 reg 3(b)
+          href: https://www.legislation.gov.uk/uksi/2018/337/regulation/3/made
+  2019-04-06:
+    value: 6_365
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2019 reg 3(b)
+          href: https://www.legislation.gov.uk/uksi/2019/262/regulation/3/made
+  2020-04-06:
+    value: 6_475
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020 reg 3(b)
+          href: https://www.legislation.gov.uk/uksi/2020/299/regulation/3/made
+  2021-04-06:
+    value: 6_515
+    metadata:
+      reference:
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2021 reg 3
+          href: https://www.legislation.gov.uk/uksi/2021/157/regulation/3/made
   2022-04-06:
     value: 6_725
     metadata:
       reference:
-        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022(3)(b)
-          href: https://www.legislation.gov.uk/uksi/2022/232/regulation/3/made#regulation-3-b
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2022 reg 3(b)
+          href: https://www.legislation.gov.uk/uksi/2022/232/regulation/3/made
+  2023-04-06:
+    value: 6_725
+    metadata:
+      reference:
+        - title: Social Security Contributions and Benefits Act 1992 s 11(4)(b) (as at 6 April 2023)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2023-04-06
+  2024-04-06:
+    value: 6_725
+    metadata:
+      reference:
+        - title: Social Security Contributions and Benefits Act 1992 s 11(4)(b) (as at 6 April 2024)
+          href: https://www.legislation.gov.uk/ukpga/1992/4/section/11/2024-04-06
   2025-04-06:
     value: 6_845
     metadata:
       reference:
-        - title: "GOV.UK | Rates and allowances: National Insurance contributions"
-          href: https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran's Relief) Regulations 2025 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2025/288/regulation/3/made
   2026-04-06:
     value: 7_105
     metadata:
       reference:
-        - title: "GOV.UK | Rates and allowances: National Insurance contributions"
-          href: https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions
+        - title: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran's Relief) Regulations 2026 reg 3(a)
+          href: https://www.legislation.gov.uk/uksi/2026/231/regulation/3/made
 metadata:
   unit: currency-GBP
+  period: year
   label: NI class 2 small profits threshold
-  uprating:
-    parameter: gov.economic_assumptions.indices.obr.consumer_price_index
-    start_instant: 2022-04-06
+  uprating: gov.economic_assumptions.indices.obr.consumer_price_index
   reference:
-    - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/882271/Table-a4.pdf
-    - https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions
+    - title: Social Security Contributions and Benefits Act 1992 s 11
+      href: https://www.legislation.gov.uk/ukpga/1992/4/section/11
+    - title: "GOV.UK | Rates and allowances: National Insurance contributions"
+      href: https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/class_2/ni_class_2.yaml

@@ -1,13 +1,134 @@
-- name: NI Class 2 - under LPL.
+# Expected values come from s.11 SSCBA 1992 as in force for each tax year
+# (legislation.gov.uk point-in-time text) and the SIs that set its figures.
+
+# 2023-24: £3.45 a week (SI 2023/236 reg 3(a)) on profits that exceed the
+# £12,570 lower profits threshold (reg 3(b)). Profits from the £6,725 small
+# profits threshold up to it are treated as paid (s.11(5A)-(5B)).
+- name: NI Class 2 - 2023-24, below the small profits threshold.
   period: 2023
   input:
     self_employment_income: 5_000
   output:
     ni_class_2: 0
 
-- name: NI Class 2 - over LPL.
+- name: NI Class 2 - 2023-24, at the small profits threshold, treated as paid.
+  period: 2023
+  input:
+    self_employment_income: 6_725
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2023-24, between the thresholds, treated as paid.
+  period: 2023
+  input:
+    self_employment_income: 10_000
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2023-24, at the lower profits threshold, not liable.
+  period: 2023
+  input:
+    self_employment_income: 12_570
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2023-24, just above the lower profits threshold.
+  period: 2023
+  input:
+    self_employment_income: 12_571
+  output:
+    ni_class_2: 3.45 * 52
+
+- name: NI Class 2 - 2023-24, above the lower profits threshold.
   period: 2023
   input:
     self_employment_income: 15_000
+  output:
+    ni_class_2: 3.45 * 52
+
+- name: NI Class 2 - 2023-24, above the upper profits limit.
+  period: 2023
+  input:
+    self_employment_income: 60_000
+  output:
+    ni_class_2: 179.4
+
+- name: NI Class 2 - 2023-24, over State Pension age.
+  period: 2023
+  input:
+    age: 70
+    self_employment_income: 60_000
+  output:
+    ni_class_2: 0
+
+# 2022-23: £3.15 a week (SI 2022/232 reg 3(a)) on profits that exceed the
+# £11,908 lower profits threshold, with effect from 6 April 2022
+# (SI 2022/1329 regs 1 and 2).
+- name: NI Class 2 - 2022-23, between the thresholds, treated as paid.
+  period: 2022
+  input:
+    self_employment_income: 8_000
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2022-23, at the lower profits threshold, not liable.
+  period: 2022
+  input:
+    self_employment_income: 11_908
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2022-23, above the lower profits threshold.
+  period: 2022
+  input:
+    self_employment_income: 11_909
   output:
     ni_class_2: 3.15 * 52
+
+# 2021-22: £3.05 a week (unchanged from SI 2020/299) on profits of, or
+# exceeding, the £6,515 small profits threshold (SI 2021/157 reg 3).
+- name: NI Class 2 - 2021-22, just below the small profits threshold.
+  period: 2021
+  input:
+    self_employment_income: 6_514
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2021-22, at the small profits threshold.
+  period: 2021
+  input:
+    self_employment_income: 6_515
+  output:
+    ni_class_2: 3.05 * 52
+
+# 2020-21: £3.05 a week from £6,475 (SI 2020/299 reg 3).
+- name: NI Class 2 - 2020-21, at the small profits threshold.
+  period: 2020
+  input:
+    self_employment_income: 6_475
+  output:
+    ni_class_2: 3.05 * 52
+
+# 2015-16: £2.80 a week from £5,965 (NICA 2015 Sch 1 para 3).
+- name: NI Class 2 - 2015-16, just below the small profits threshold.
+  period: 2015
+  input:
+    self_employment_income: 5_964
+  output:
+    ni_class_2: 0
+
+- name: NI Class 2 - 2015-16, at the small profits threshold.
+  period: 2015
+  input:
+    self_employment_income: 5_965
+  output:
+    ni_class_2: 2.8 * 52
+
+# 2024-25: s.11(2) omitted from 6 April 2024 (NICA (Reduction in Rates) Act
+# 2023 s.3); no compulsory Class 2.
+- name: NI Class 2 - 2024-25, abolished.
+  period: 2024
+  input:
+    self_employment_income: 60_000
+  output:
+    ni_class_2: 0