Charge employer NI on employees over state pension age

changelog.d/1894.fixed.md

@@ -0,0 +1 @@
+Charge secondary (employer) Class 1 National Insurance on employees over state pension age. SSCBA 1992 s.6(3) ends only primary (employee) contributions at pensionable age.

docs/book/programs/gov/hmrc/national-insurance.ipynb

@@ -171,7 +171,7 @@
   {
    "cell_type": "markdown",
    "metadata": {},
-   "source": "## How PolicyEngine computes National Insurance liability\n\nFor each person, PolicyEngine computes NI contributions class-by-class:\n\n- **Class 1 employee** (`ni_class_1_employee`): the sum of `ni_class_1_employee_primary` (main rate on earnings between the Primary Threshold and the Upper Earnings Limit) and `ni_class_1_employee_additional` (additional rate on earnings above the UEL).\n- **Class 1 employer** (`ni_class_1_employer`): paid on earnings above the Secondary Threshold; surfaced through the `ni_employer` variable.\n- **Class 2** (`ni_class_2`): a flat weekly rate paid by the self-employed with profits above the Small Profits Threshold.\n- **Class 3** (`ni_class_3`): a voluntary flat weekly rate; the variable is exposed but defaults to zero unless explicitly set.\n- **Class 4** (`ni_class_4`): main rate between the Lower and Upper Profits Limits plus additional rate above the UPL. Where the person also pays primary Class 1 contributions (or, before 6 April 2024, Class 2 contributions), liability is capped at the annual maximum in regulation 100 of the Social Security (Contributions) Regulations 2001 (`ni_class_4_maximum`).\n\nThe individual total `national_insurance` sums the four employee and self-employed components directly — `ni_class_1_employee + ni_class_2 + ni_class_3 + ni_class_4` — so voluntary Class 3 contributions are included in the household-side liability. The convenience aggregates `ni_employee` (Class 1 employee only) and `ni_self_employed` (Class 2 + Class 4) are also exposed for reporting. The Class 1 *employer* charge (`ni_class_1_employer`, surfaced as `ni_employer`) is an employer-side cost rather than part of the individual's `national_insurance`, so it is tracked separately and feeds the government revenue aggregates on its own.\n\nParameters live in `policyengine_uk/parameters/gov/hmrc/national_insurance/` and the per-class formulas in `policyengine_uk/variables/gov/hmrc/national_insurance/`."
+   "source": "## How PolicyEngine computes National Insurance liability\n\nFor each person, PolicyEngine computes NI contributions class-by-class:\n\n- **Class 1 employee** (`ni_class_1_employee`): the sum of `ni_class_1_employee_primary` (main rate on earnings between the Primary Threshold and the Upper Earnings Limit) and `ni_class_1_employee_additional` (additional rate on earnings above the UEL). These primary contributions are due from age 16 until state pension age (`ni_liable`): SSCBA 1992 s.6(3) ends them at pensionable age.\n- **Class 1 employer** (`ni_class_1_employer`): paid on earnings above the Secondary Threshold; surfaced through the `ni_employer` variable. These secondary contributions are due on earners over 16 with no upper age limit (`ni_class_1_secondary_liable`), so employers keep paying them for employees over state pension age (SSCBA 1992 s.6(1)(b) and s.6(3)).\n- **Class 2** (`ni_class_2`): a flat weekly rate paid by the self-employed with profits above the Small Profits Threshold.\n- **Class 3** (`ni_class_3`): a voluntary flat weekly rate; the variable is exposed but defaults to zero unless explicitly set.\n- **Class 4** (`ni_class_4`): main rate between the Lower and Upper Profits Limits plus additional rate above the UPL. Where the person also pays primary Class 1 contributions (or, before 6 April 2024, Class 2 contributions), liability is capped at the annual maximum in regulation 100 of the Social Security (Contributions) Regulations 2001 (`ni_class_4_maximum`).\n\nThe individual total `national_insurance` sums the four employee and self-employed components directly — `ni_class_1_employee + ni_class_2 + ni_class_3 + ni_class_4` — so voluntary Class 3 contributions are included in the household-side liability. The convenience aggregates `ni_employee` (Class 1 employee only) and `ni_self_employed` (Class 2 + Class 4) are also exposed for reporting. The Class 1 *employer* charge (`ni_class_1_employer`, surfaced as `ni_employer`) is an employer-side cost rather than part of the individual's `national_insurance`, so it is tracked separately and feeds the government revenue aggregates on its own.\n\nParameters live in `policyengine_uk/parameters/gov/hmrc/national_insurance/` and the per-class formulas in `policyengine_uk/variables/gov/hmrc/national_insurance/`."
   },
   {
    "cell_type": "markdown",

policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/class_1/ni_class_1_employer.yaml

@@ -13,3 +13,91 @@
     ni_class_1_income: 30_000  # Annual income above secondary threshold but below upper limit
   output:
     ni_class_1_employer: (30_000 - 175 * 52) * 0.138  # Expected employer contributions
+
+# SSCBA 1992 s.6(3) ends primary Class 1 at pensionable age "without prejudice
+# to any liability to pay secondary Class 1 contributions". Secondary
+# contributions are due on earners over 16 (s.6(1)(b)) with no upper age.
+# The model annualises the weekly secondary threshold as 52 weeks: 2026-27 is
+# £96 x 52 = £4,992 at 15%; 2024-25 is £175 x 52 = £9,100 at 13.8%.
+
+- name: Employer NI is charged on an employee aged 70 (2026)
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 70
+    employment_income: 40_000
+  output:
+    ni_class_1_employee: 0
+    ni_class_1_employer: 5_251.20  # 0.15 x (40,000 - 4,992)
+    ni_employer: 5_251.20
+    national_insurance: 0
+    total_national_insurance: 5_251.20
+    employer_cost: 45_251.20
+
+- name: Employer NI is charged on an employee aged 70 (2024)
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    age: 70
+    employment_income: 40_000
+  output:
+    ni_class_1_employee: 0
+    ni_class_1_employer: 4_264.20  # 0.138 x (40,000 - 9,100)
+
+- name: Employer NI has no upper earnings limit over state pension age
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 75
+    employment_income: 60_000
+  output:
+    ni_class_1_employee: 0
+    ni_class_1_employer: 8_251.20  # 0.15 x (60,000 - 4,992)
+
+- name: Earnings below the secondary threshold over state pension age
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 70
+    employment_income: 4_000
+  output:
+    ni_class_1_employer: 0
+
+# The next two cases set is_SP_age directly, so they test the split between
+# the two sides rather than how state pension age is derived.
+
+- name: Below state pension age, both sides are charged
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 66
+    is_SP_age: false
+    employment_income: 40_000
+  output:
+    ni_liable: true
+    ni_class_1_secondary_liable: true
+    ni_class_1_employee: 2_194.40  # 0.08 x (40,000 - 12,570)
+    ni_class_1_employer: 5_251.20
+
+- name: At state pension age, only the employer side is charged
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 66
+    is_SP_age: true
+    employment_income: 40_000
+  output:
+    ni_liable: false
+    ni_class_1_secondary_liable: true
+    ni_class_1_employee: 0
+    ni_class_1_employer: 5_251.20
+
+- name: No employer NI on an earner under 16
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 15
+    employment_income: 40_000
+  output:
+    ni_class_1_employee: 0
+    ni_class_1_employer: 0

policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/class_1/ni_class_1_secondary_liable.yaml

@@ -0,0 +1,32 @@
+# SSCBA 1992 s.6(1)(b) and s.6(3): secondary Class 1 contributions are due on
+# earners over 16 and continue after pensionable age.
+
+- name: Under 16 is not liable for secondary Class 1
+  period: 2026
+  input:
+    age: 15
+  output:
+    ni_class_1_secondary_liable: false
+
+- name: Aged 16 is liable for secondary Class 1
+  period: 2026
+  input:
+    age: 16
+  output:
+    ni_class_1_secondary_liable: true
+
+- name: Working-age adult is liable for secondary Class 1
+  period: 2026
+  input:
+    age: 35
+  output:
+    ni_class_1_secondary_liable: true
+
+- name: Adult over state pension age remains liable for secondary Class 1
+  period: 2026
+  input:
+    age: 70
+  output:
+    is_SP_age: true
+    ni_liable: false
+    ni_class_1_secondary_liable: true

policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/class_1/ni_liable.yaml

@@ -12,7 +12,7 @@
   output:
     ni_liable: true
 
-- name: Retired adult isn't liable for NI.
+- name: Adult over state pension age isn't liable for primary NI.
   period: 2023
   input:
     age: 70

policyengine_uk/tests/test_ni_class_1_age_properties.py

@@ -0,0 +1,167 @@
+"""Property-based tests for the age conditions on Class 1 National Insurance.
+
+SSCBA 1992 s.6(1) makes primary and secondary Class 1 contributions payable on
+earnings of an earner over 16. s.6(3) ends primary contributions at
+pensionable age "without prejudice to any liability to pay secondary Class 1
+contributions". So, for any secondary threshold ST >= 0, employer rate r >= 0,
+earnings e >= 0 and age a:
+
+1. Secondary Class 1 continues past state pension age: at every age from 21,
+   including at and over state pension age, ni_class_1_employer equals
+   r * max(e - 52 * ST, 0), computed exactly. That is the s.9 charge for an
+   earner who is not an apprentice, before the elective veterans and freeport
+   reliefs and the employer-level Employment Allowance. The test people are
+   not apprentices and have no employer pension contributions, so e is their
+   Class 1 earnings. Ages 16 to 20 are not checked against it: s.9A sets
+   a 0% rate for them up to the upper secondary threshold, which the model
+   does not implement.
+2. Nothing under 16: for a < 16, both ni_class_1_employer and
+   ni_class_1_employee are zero.
+3. Primary Class 1 stops at state pension age: when is_SP_age holds,
+   ni_class_1_employee is zero.
+
+Comparisons allow float32 rounding: the model stores values as float32.
+"""
+
+from fractions import Fraction
+
+from hypothesis import HealthCheck, example, given, settings
+from hypothesis import strategies as st
+
+from policyengine_uk import Simulation
+
+CLASS_1 = "gov.hmrc.national_insurance.class_1"
+YEARS = list(range(2016, 2031))
+PROPERTY_SETTINGS = settings(
+    max_examples=25,
+    deadline=None,
+    derandomize=True,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+
+
+def tolerance(*amounts):
+    return 0.01 + 4e-7 * max(abs(float(a)) for a in amounts)
+
+
+@st.composite
+def populations(draw):
+    policy = dict(
+        year=draw(st.sampled_from(YEARS)),
+        # None keeps the baseline threshold and rate for that year.
+        secondary_threshold=draw(
+            st.one_of(st.none(), st.floats(0, 1_000, allow_nan=False))
+        ),
+        employer_rate=draw(st.one_of(st.none(), st.floats(0, 0.3, allow_nan=False))),
+    )
+    people = draw(
+        st.lists(
+            st.tuples(
+                st.integers(0, 100),
+                st.one_of(
+                    st.just(0.0),
+                    st.floats(0, 500_000, allow_nan=False, allow_infinity=False),
+                    st.integers(0, 500_000).map(float),
+                ),
+            ),
+            min_size=1,
+            max_size=12,
+        )
+    )
+    return policy, people
+
+
+def simulate(policy, people):
+    year = policy["year"]
+    situation = {
+        "people": {
+            f"p{i}": {
+                "age": {year: age},
+                "employment_income": {year: earnings},
+            }
+            for i, (age, earnings) in enumerate(people)
+        },
+        "benunits": {f"b{i}": {"members": [f"p{i}"]} for i in range(len(people))},
+        "households": {f"h{i}": {"members": [f"p{i}"]} for i in range(len(people))},
+    }
+    # A bare reform value only applies from 2023, so give an explicit range.
+    all_years = "2000-01-01.2100-12-31"
+    reform = {}
+    if policy["secondary_threshold"] is not None:
+        reform[f"{CLASS_1}.thresholds.secondary_threshold"] = {
+            all_years: policy["secondary_threshold"]
+        }
+    if policy["employer_rate"] is not None:
+        reform[f"{CLASS_1}.rates.employer"] = {all_years: policy["employer_rate"]}
+    sim = Simulation(situation=situation, reform=reform or None)
+    values = {
+        variable: sim.calculate(variable, year)
+        for variable in [
+            "age",
+            "is_SP_age",
+            "ni_class_1_income",
+            "ni_class_1_employee",
+            "ni_class_1_employer",
+        ]
+    }
+    class_1 = sim.tax_benefit_system.parameters(
+        f"{year}-01-01"
+    ).gov.hmrc.national_insurance.class_1
+    values["secondary_threshold"] = class_1.thresholds.secondary_threshold
+    values["employer_rate"] = class_1.rates.employer
+    return values
+
+
+def statutory_secondary(earnings, weekly_threshold, rate):
+    """Secondary Class 1 on annual earnings, in exact arithmetic.
+
+    The model annualises the weekly secondary threshold as 52 weeks.
+    """
+    threshold = 52 * Fraction(float(weekly_threshold))
+    return Fraction(float(rate)) * max(Fraction(float(earnings)) - threshold, 0)
+
+
+# The #1894 regression: an employee aged 70 on £40,000 in 2026, next to a
+# working-age employee on the same pay.
+REGRESSION_EXAMPLE = (
+    dict(year=2026, secondary_threshold=None, employer_rate=None),
+    [(70, 40_000.0), (35, 40_000.0)],
+)
+
+
+@PROPERTY_SETTINGS
+@given(populations())
+@example(REGRESSION_EXAMPLE)
+def test_secondary_class_1_continues_past_state_pension_age(population):
+    policy, people = population
+    values = simulate(policy, people)
+    for i, (age, _) in enumerate(people):
+        model = float(values["ni_class_1_employer"][i])
+        earnings = float(values["ni_class_1_income"][i])
+        if age < 16:
+            assert model == 0
+            continue
+        if age < 21:
+            # s.9A under-21 relief is not modelled; see the module docstring.
+            continue
+        expected = statutory_secondary(
+            earnings, values["secondary_threshold"], values["employer_rate"]
+        )
+        assert abs(model - float(expected)) <= tolerance(expected, earnings), (
+            policy,
+            age,
+            earnings,
+            model,
+            float(expected),
+        )
+
+
+@PROPERTY_SETTINGS
+@given(populations())
+@example(REGRESSION_EXAMPLE)
+def test_primary_class_1_stops_at_state_pension_age(population):
+    policy, people = population
+    values = simulate(policy, people)
+    for i, (age, _) in enumerate(people):
+        if age < 16 or values["is_SP_age"][i]:
+            assert float(values["ni_class_1_employee"][i]) == 0, (policy, age)

policyengine_uk/variables/gov/hmrc/national_insurance/class_1/ni_class_1_employer.py

@@ -7,7 +7,7 @@ class ni_class_1_employer(Variable):
     label = "NI Class 1 employer-side contributions"
     definition_period = YEAR
     unit = GBP
-    defined_for = "ni_liable"
+    defined_for = "ni_class_1_secondary_liable"
     reference = "https://www.legislation.gov.uk/ukpga/1992/4/section/9"
 
     def formula(person, period, parameters):

policyengine_uk/variables/gov/hmrc/national_insurance/class_1/ni_class_1_secondary_liable.py

@@ -0,0 +1,18 @@
+from policyengine_uk.model_api import *
+
+
+class ni_class_1_secondary_liable(Variable):
+    label = "age-liable for secondary Class 1 NI"
+    documentation = (
+        "Whether this person's age allows secondary (employer) Class 1 "
+        "contributions on their earnings. Secondary contributions are due on "
+        "earners over 16 (SSCBA 1992 s.6(1)(b)). Unlike primary contributions, "
+        "they continue after the earner reaches pensionable age (s.6(3))."
+    )
+    entity = Person
+    definition_period = YEAR
+    value_type = bool
+    reference = "https://www.legislation.gov.uk/ukpga/1992/4/section/6"
+
+    def formula(person, period, parameters):
+        return person("over_16", period)

policyengine_uk/variables/gov/hmrc/national_insurance/class_1/ni_liable.py

@@ -2,11 +2,25 @@
 
 
 class ni_liable(Variable):
-    label = "NI liable"
-    documentation = "Whether this person is liable for NI contributions by their age."
+    label = "age-liable for primary Class 1, Class 2 and Class 4 NI"
+    documentation = (
+        "Whether this person's age allows primary (employee) Class 1, Class 2 "
+        "and Class 4 contributions: 16 or over and under state pension age. "
+        "Primary Class 1 ends at pensionable age (SSCBA 1992 s.6(3)), Class 2 "
+        "after the week the earner reaches it (s.11(7)(b)) and Class 4 for "
+        "anyone over it at the start of the tax year (SI 2001/1004 reg 91(a)). "
+        "The model applies all three with the annual is_SP_age flag. Secondary "
+        "(employer) Class 1 has no upper age limit; see "
+        "ni_class_1_secondary_liable."
+    )
     entity = Person
     definition_period = YEAR
     value_type = bool
+    reference = [
+        "https://www.legislation.gov.uk/ukpga/1992/4/section/6",
+        "https://www.legislation.gov.uk/ukpga/1992/4/section/11",
+        "https://www.legislation.gov.uk/uksi/2001/1004/regulation/91",
+    ]
 
     def formula(person, period, parameters):
         return person("over_16", period) & ~person("is_SP_age", period)