Annualise the employer NI secondary threshold to the statutory £5,000

changelog.d/1967.fixed.md

@@ -0,0 +1 @@
+- Store the Class 1 secondary threshold from 2025-26 as £5,000 / 52 a week, so employer National Insurance uses the statutory annual £5,000 (SI 2001/1004 reg 11(3A)(b)) rather than 52 x the rounded weekly £96 = £4,992. Employer NI falls by up to £1.20 a year per employee earning above the threshold.

policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/thresholds/secondary_threshold.yaml

@@ -7,8 +7,13 @@ metadata:
   - 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
   unit: currency-GBP
-# The model stores the weekly £96 in reg 10(d) and annualises it as 52 weeks
-# (£4,992); reg 11(3A)(b) gives £5,000 a year (#1967).
+# From 2025-26 the value is the annual £5,000 in SI 2001/1004 reg 11(3A)(b)
+# divided by 52 (96.153846 = 5,000 / 52), so that the model's 52-week
+# annualisation gives £5,000. This is the convention reg 11(3)(c) and
+# 11(2A)(c) use for the primary threshold and upper earnings limit, which the
+# model also stores as annual / 52. The rounded weekly figure in reg 10(d) is
+# £96, which would annualise to £4,992 (#1967). Before 2025-26 the weekly
+# figure times 52 equals the annual one (for example £175 x 52 = £9,100).
 # Legal status: SI 2001/1004 reg 10 sets the amounts for 2026-27 only. The
 # 2027-28 to 2030-31 values are announced policy (Autumn Budget 2024 and
 # Budget 2025), to be set in each year's rates, limits and thresholds
@@ -30,43 +35,45 @@ values:
     value: 175
   2024-01-01: 175
   2025-04-06:
-    value: 96
+    value: 96.153846
     metadata:
       reference:
         - title: National Insurance Contributions (Secondary Class 1 Contributions) Act 2025 s.2
           href: https://www.legislation.gov.uk/ukpga/2025/11/section/2
+        - title: The Social Security (Contributions) Regulations 2001 reg 11(3A)(b) (£5,000 where the earnings period is a year)
+          href: https://www.legislation.gov.uk/uksi/2001/1004/regulation/11
   2026-04-06:
-    value: 96
+    value: 96.153846
     metadata:
       reference:
         - title: The Social Security (Contributions) Regulations 2001 reg 10(d) and reg 11(3A), for 2026-27 (reg 10's tax year set by SI 2026/231 reg 5(2)(a))
           href: https://www.legislation.gov.uk/uksi/2001/1004/regulation/11/2026-04-06
         - title: SI 2026/231 reg 5
           href: https://www.legislation.gov.uk/uksi/2026/231/regulation/5/made
   2027-04-06:
-    value: 96
+    value: 96.153846
     metadata:
       reference:
         - title: "HMRC: Changes to the Class 1 National Insurance Contributions Secondary Threshold, the Secondary Class 1 National Insurance contributions rate, and the Employment Allowance from 6 April 2025 (Autumn Budget 2024)"
           href: https://www.gov.uk/government/publications/changes-to-the-class-1-national-insurance-contributions-secondary-threshold-the-secondary-class-1-national-insurance-contributions-rate-and-the-empl/changes-to-the-class-1-national-insurance-contributions-secondary-threshold-the-secondary-class-1-national-insurance-contributions-rate-and-the-empl
   2028-04-06:
-    value: 96
+    value: 96.153846
     metadata:
       reference:
         - title: Budget 2025 (HC 1492) para 4.112
           href: https://assets.publishing.service.gov.uk/media/6929b353345e31ab14ecf735/E03444720_Budget_2025_Web_Accessible.pdf#page=113
         - title: Explanatory Memorandum to SI 2026/231 para 5.26
           href: https://www.legislation.gov.uk/uksi/2026/231/pdfs/uksiem_20260231_en_001.pdf
   2029-04-06:
-    value: 96
+    value: 96.153846
     metadata:
       reference:
         - title: Budget 2025 (HC 1492) para 4.112
           href: https://assets.publishing.service.gov.uk/media/6929b353345e31ab14ecf735/E03444720_Budget_2025_Web_Accessible.pdf#page=113
         - title: Explanatory Memorandum to SI 2026/231 para 5.26
           href: https://www.legislation.gov.uk/uksi/2026/231/pdfs/uksiem_20260231_en_001.pdf
   2030-04-06:
-    value: 96
+    value: 96.153846
     metadata:
       reference:
         - title: Budget 2025 (HC 1492) para 4.112

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

@@ -17,8 +17,8 @@
 # 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%.
+# The annual secondary threshold is £5,000 at 15% in 2026-27 (SI 2001/1004
+# reg 11(3A)(b)) and £175 x 52 = £9,100 at 13.8% in 2024-25.
 
 - name: Employer NI is charged on an employee aged 70 (2026)
   period: 2026
@@ -28,11 +28,11 @@
     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
+    ni_class_1_employer: 5_250.00  # 0.15 x (40,000 - 5,000)
+    ni_employer: 5_250.00
     national_insurance: 0
-    total_national_insurance: 5_251.20
-    employer_cost: 45_251.20
+    total_national_insurance: 5_250.00
+    employer_cost: 45_250.00
 
 - name: Employer NI is charged on an employee aged 70 (2024)
   period: 2024
@@ -52,7 +52,7 @@
     employment_income: 60_000
   output:
     ni_class_1_employee: 0
-    ni_class_1_employer: 8_251.20  # 0.15 x (60,000 - 4,992)
+    ni_class_1_employer: 8_250.00  # 0.15 x (60,000 - 5,000)
 
 - name: Earnings below the secondary threshold over state pension age
   period: 2026
@@ -77,7 +77,7 @@
     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
+    ni_class_1_employer: 5_250.00
 
 - name: At state pension age, only the employer side is charged
   period: 2026
@@ -90,7 +90,7 @@
     ni_liable: false
     ni_class_1_secondary_liable: true
     ni_class_1_employee: 0
-    ni_class_1_employer: 5_251.20
+    ni_class_1_employer: 5_250.00
 
 - name: No employer NI on an earner under 16
   period: 2026
@@ -101,3 +101,42 @@
   output:
     ni_class_1_employee: 0
     ni_class_1_employer: 0
+
+# SI 2001/1004 reg 11(3A)(b): the annual secondary threshold is £5,000 from
+# 2025-26, not 52 x the rounded weekly £96 = £4,992 (#1967).
+
+- name: No employer NI on annual earnings of exactly £5,000 (2025-26)
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    ni_class_1_income: 5_000
+  output:
+    ni_class_1_employer: 0
+
+- name: Employer NI on annual earnings of £4,992 to £5,000 is nil (2026-27)
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    ni_class_1_income: 4_996
+  output:
+    ni_class_1_employer: 0
+
+- name: Employer NI starts above £5,000 a year (2026-27)
+  period: 2026
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    ni_class_1_income: 6_000
+  output:
+    ni_class_1_employer: 150  # 0.15 x (6,000 - 5,000)
+
+- name: Employer NI on £40,000 in 2025-26 uses the £5,000 annual threshold
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    ni_class_1_income: 40_000
+  output:
+    ni_class_1_employer: 5_250  # 0.15 x (40,000 - 5,000)

policyengine_uk/tests/policy/baseline/gov/hmrc/national_insurance/ni_threshold_freeze.yaml

@@ -3,7 +3,8 @@
 # UPL £50,270, ST £5,000 (£96 a week). 2027-28 was already frozen by
 # Autumn Statement 2022 (PT, UEL, LPL, UPL) and Autumn Budget 2024 (ST).
 # Rates: Class 1 8% / 2%, employer 15%, Class 4 6% / 2%.
-# The model annualises the weekly ST as 52 x £96 = £4,992.
+# The model stores the ST as 5,000 / 52 a week (reg 11(3A)), so 52 weeks give
+# £5,000 (#1967).
 
 - name: 2027-28 employee Class 1 at the primary threshold
   period: 2027
@@ -22,7 +23,7 @@
     employment_income: 30_000
   output:
     ni_class_1_employee: (30_000 - 12_570) * 0.08  # 1,394.40
-    ni_class_1_employer: (30_000 - 4_992) * 0.15  # 3,751.20
+    ni_class_1_employer: (30_000 - 5_000) * 0.15  # 3,750.00
 
 - name: 2027-28 employee Class 1 above the UEL
   period: 2027
@@ -33,7 +34,7 @@
   output:
     ni_class_1_employee_primary: (50_270 - 12_570) * 0.08  # 3,016
     ni_class_1_employee_additional: (60_000 - 50_270) * 0.02  # 194.60
-    ni_class_1_employer: (60_000 - 4_992) * 0.15  # 8,251.20
+    ni_class_1_employer: (60_000 - 5_000) * 0.15  # 8,250.00
 
 - name: 2027-28 Class 4 at the lower profits limit
   period: 2027
@@ -79,7 +80,7 @@
     employment_income: 30_000
   output:
     ni_class_1_employee: (30_000 - 12_570) * 0.08  # 1,394.40
-    ni_class_1_employer: (30_000 - 4_992) * 0.15  # 3,751.20
+    ni_class_1_employer: (30_000 - 5_000) * 0.15  # 3,750.00
 
 - name: 2030-31 employee Class 1 above the UEL
   period: 2030
@@ -90,7 +91,7 @@
   output:
     ni_class_1_employee_primary: (50_270 - 12_570) * 0.08  # 3,016
     ni_class_1_employee_additional: (60_000 - 50_270) * 0.02  # 194.60
-    ni_class_1_employer: (60_000 - 4_992) * 0.15  # 8,251.20
+    ni_class_1_employer: (60_000 - 5_000) * 0.15  # 8,250.00
 
 - name: 2030-31 Class 4 at the lower profits limit
   period: 2030

policyengine_uk/tests/test_ni_threshold_freeze.py

@@ -6,11 +6,11 @@
 Earnings Limit is not frozen: it rose with CPI to £129 a week in 2026-27.
 
 Model year Y is the fiscal year starting 6 April Y. The model stores PT and UEL
-as the annual amounts over 52 (12,570 / 52 and 50,270 / 52, as SI 2001/1004
-reg 11(3)(c) and 11(2A)(c) do for periods of whole weeks) and ST as the reg
-10(d) weekly amount (£96), and annualises weekly thresholds as 52 weeks. So the
-model's annual ST is £4,992, where reg 11(3A)(b) gives £5,000 (#1967); the
-statute table follows the model here, and a strict xfail marks the gap.
+and ST as the annual amounts over 52 (12,570 / 52, 50,270 / 52 and 5,000 / 52,
+as SI 2001/1004 reg 11(3)(c), 11(2A)(c) and 11(3A)(c) do for periods of whole
+weeks), and annualises weekly thresholds as 52 weeks. So the model's annual ST
+is the £5,000 in reg 11(3A)(b), not 52 x the rounded reg 10(d) weekly £96
+(£4,992) (#1967).
 
 Invariants:
 
@@ -59,8 +59,7 @@
 STATUTORY_2026_27 = {
     "lower_earnings_limit": Fraction(129),  # weekly, CPI-uprated
     "primary_threshold": Fraction(12_570, 52),  # annual / 52
-    # reg 10(d) weekly, as the model stores it; see #1967 for the annual £5,000.
-    "secondary_threshold": Fraction(96),
+    "secondary_threshold": Fraction(5_000, 52),  # annual / 52 (#1967)
     "upper_earnings_limit": Fraction(50_270, 52),  # annual / 52
     "lower_profits_limit": Fraction(12_570),  # annual
     "upper_profits_limit": Fraction(50_270),  # annual
@@ -129,15 +128,12 @@ def test_lower_earnings_limit_2025_26_and_2026_27(system):
     assert threshold(system, "lower_earnings_limit", 2026) == 129
 
 
-@pytest.mark.xfail(
-    strict=True,
-    reason="#1967: the model annualises the weekly ST as 52 x £96 = £4,992; "
-    "SI 2001/1004 reg 11(3A)(b) gives £5,000 a year.",
-)
-@pytest.mark.parametrize("year", FROZEN_YEARS)
+@pytest.mark.parametrize("year", [2025, *FROZEN_YEARS])
 def test_annual_secondary_threshold_is_statutory(system, year):
+    # SI 2001/1004 reg 11(3A)(b): £5,000 where the earnings period is a year
+    # (#1967). 52 x the rounded weekly £96 would give £4,992.
     annual = 52 * threshold(system, "secondary_threshold", year)
-    assert annual == pytest.approx(5_000, abs=0.5)
+    assert annual == pytest.approx(5_000, abs=0.01)
 
 
 # Invariant 2: cash freeze.
@@ -328,7 +324,7 @@ def check_liabilities(earnings, profits, years):
 # Every threshold, a penny and a pound either side, plus seeded random levels.
 EDGES = [
     edge + offset
-    for edge in [4_992, 12_570, 50_270]
+    for edge in [4_992, 5_000, 12_570, 50_270]
     for offset in (-1, -0.01, 0, 0.01, 1)
 ]