Charge employer Class 1 NI at 15.05% in 2022-23

changelog.d/2226.fixed.md

@@ -0,0 +1 @@
+- Add the 15.05% employer Class 1 rate for 2022-23 (Health and Social Care Levy Act 2021 s.5(2)(b)) and its end on 6 November 2022 (Health and Social Care Levy (Repeal) Act 2022 s.2(1)). Model year 2022 now reads 15.05%, as the employee main rate reads 13.25%.

docs/book/policy/model-baseline.md

@@ -14,7 +14,7 @@ Budget 2025 keeps the income tax personal allowance and basic rate limit, and th
 
 ### Autumn Budget 2024
 
-The government increased the [employer National Insurance rate from 13.8% to 15%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employer.yaml#L13-L17) and reduced the [employer secondary threshold from £9,100 to £5,000 annually](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/thresholds/secondary_threshold.yaml#L26-L30), both taking effect in fiscal year 2025-26.
+The government increased the [employer National Insurance rate from 13.8% to 15%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employer.yaml#L30-L35) and reduced the [employer secondary threshold from £9,100 to £5,000 annually](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/thresholds/secondary_threshold.yaml#L26-L30), both taking effect in fiscal year 2025-26.
 
 ### Universal Credit rebalancing
 
@@ -28,7 +28,7 @@ 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#L24-L29) 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.
 
 ### Capital gains tax changes (Autumn Budget 2024)
 
@@ -40,7 +40,7 @@ The government increased the [child benefit high income tax charge threshold fro
 
 ### Autumn Statement 2023 (Employee NI cut)
 
-An initial National Insurance cut reduced the [employee main rate from 12% to 10%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml#L16-L21) in fiscal year 2024-25.
+An initial National Insurance cut reduced the [employee main rate from 12% to 10%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml#L18-L23) in fiscal year 2024-25.
 
 ## 2023 reforms
 
@@ -56,7 +56,7 @@ The government announced an increase in the [National Insurance primary threshol
 
 ### Autumn Budget 2021 (Health and Social Care Levy)
 
-The government temporarily increased [National Insurance rates by 1.25 percentage points](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml#L4-L10) in fiscal year 2022-23, later reversed the same fiscal year.
+The Health and Social Care Levy Act 2021 raised the [employee main rate from 12% to 13.25%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml#L4-L17) and the [employer rate from 13.8% to 15.05%](https://github.com/PolicyEngine/policyengine-uk/blob/master/policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employer.yaml#L18-L29) for fiscal year 2022-23. The Health and Social Care Levy (Repeal) Act 2022 restored 12% and 13.8% for earnings paid from 6 November 2022. The model reads each fiscal year's rates at 30 April, so 2022-23 carries the levy rates for the whole year ([#1807](https://github.com/PolicyEngine/policyengine-uk/issues/1807)).
 
 ### Mini-Budget 2022 (September)
 

policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employee/main.yaml

@@ -1,10 +1,12 @@
 description: The Class 1 National Insurance main rate is paid on employment earnings between the Primary Threshold and the Upper Earnings Limit.
 values:
   2015-04-01: 0.12
-  2022-04-01: 
+  2022-04-06:
     value: 0.1325
     metadata:
       reference:
+        - title: Health and Social Care Levy Act 2021 s.5(2)(a)(i)
+          href: https://www.legislation.gov.uk/ukpga/2021/28/section/5/enacted
         - title: Autumn Budget and Spending Review 2022
           href: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1043689/Budget_AB2021_Web_Accessible.pdf
   2022-11-06:

policyengine_uk/parameters/gov/hmrc/national_insurance/class_1/rates/employer.yaml

@@ -4,14 +4,32 @@ metadata:
   label: NI employer rate
   propagate_metadata_to_children: true
   unit: /1
+  # Annual values are the rate at 30 April of each tax year, as for the
+  # employee main rate (no fiscal_year_blend). For 2022-23 that is the levy
+  # rate of 15.05%, although earnings paid from 6 November 2022 were charged
+  # at 13.8%; see #1807 for the choice between sampling and averaging.
 values:
-  2015-04-01: 
+  2015-04-01:
     value: 0.138
-    reference:
-      - title: National Insurance rates and thresholds
-        href: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/882271/Table-a4.pdf
-  2025-01-01: 
+    metadata:
+      reference:
+        - title: National Insurance rates and thresholds
+          href: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/882271/Table-a4.pdf
+  2022-04-06:
+    value: 0.1505
+    metadata:
+      reference:
+        - title: Health and Social Care Levy Act 2021 s.5(2)(b)
+          href: https://www.legislation.gov.uk/ukpga/2021/28/section/5/enacted
+  2022-11-06:
+    value: 0.138
+    metadata:
+      reference:
+        - title: Health and Social Care Levy (Repeal) Act 2022 s.2(1)
+          href: https://www.legislation.gov.uk/ukpga/2022/43/section/2/enacted
+  2025-01-01:
     value: 0.15
-    reference:
-      - title: National Insurance Contributions (Secondary Class 1 Contributions) Act 2025(1)
-        href: https://www.legislation.gov.uk/ukpga/2025/11/section/1
+    metadata:
+      reference:
+        - title: National Insurance Contributions (Secondary Class 1 Contributions) Act 2025 s.1
+          href: https://www.legislation.gov.uk/ukpga/2025/11/section/1

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

@@ -171,3 +171,49 @@
     ni_class_1_income: 8_100  # 52 x £155 = £8,060 would charge £5.52
   output:
     ni_class_1_employer: 0
+
+# 2022-23: the Health and Social Care Levy Act 2021 s.5(2)(b) made the
+# secondary percentage 15.05%, until the Health and Social Care Levy (Repeal)
+# Act 2022 s.2(1) restored 13.8% for earnings paid from 6 November 2022. Model
+# year 2022 takes the rate at 30 April, 15.05%, as the employee main rate takes
+# 13.25%. The annual secondary threshold is £175 x 52 = £9,100. HMRC, "Rates and
+# thresholds for employers 2022 to 2023": 15.05% from 6 April to 5 November
+# 2022, 13.8% from 6 November 2022 to 5 April 2023, £9,100 a year.
+
+- name: Employer NI on £30,000 in 2022-23 is at the 15.05% levy rate
+  period: 2022
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    employment_income: 30_000
+  output:
+    ni_class_1_employer: 3_145.45  # 0.1505 x (30,000 - 9,100)
+    ni_employer: 3_145.45
+
+- name: Employer NI on £30,000 in 2023-24 is back at 13.8%
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    employment_income: 30_000
+  output:
+    ni_class_1_employer: 2_884.20  # 0.138 x (30,000 - 9,100)
+    ni_employer: 2_884.20
+
+- name: Employer NI on £30,000 in 2021-22 is at 13.8%
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    employment_income: 30_000
+  output:
+    ni_class_1_employer: 2_920.08  # 0.138 x (30,000 - 170 x 52)
+
+- name: The 2022-23 levy rate applies above the upper earnings limit
+  period: 2022
+  absolute_error_margin: 0.01
+  input:
+    age: 40
+    employment_income: 100_000
+  output:
+    ni_class_1_employer: 13_680.45  # 0.1505 x (100,000 - 9,100)

policyengine_uk/tests/test_ni_health_and_social_care_levy.py

@@ -0,0 +1,208 @@
+"""Class 1 rates under the Health and Social Care Levy in 2022-23.
+
+The Health and Social Care Levy Act 2021 s.5(2) raised two Class 1
+percentages for the tax year 2022-23 by 1.25 points: the main primary
+percentage from 12% to 13.25% (s.5(2)(a)(i)) and the secondary percentage
+from 13.8% to 15.05% (s.5(2)(b)). The Health and Social Care Levy (Repeal) Act
+2022 s.2(1) kept both only for payments of earnings made before 6 November
+2022. Para 5(3) of its Schedule gives the annual rates for directors' annual
+earnings periods: 12.73% main primary and 14.53% secondary.
+
+The rate parameters store these as dated values. The model reads each tax
+year at 30 April (convert_to_fiscal_year_parameters), so model year 2022
+takes the levy rate on both sides. Whether to average across the year instead
+is open in #1807.
+
+Invariants, checked on the parameter files as stored:
+
+1. Statutory window: for any date d, the employer rate is 15.05% if and only
+   if 6 April 2022 <= d < 6 November 2022, and the employee main rate is
+   13.25% on exactly the same dates.
+2. Same dates: in the 2022-23 tax year the two rates change on the same
+   dates, 6 April and 6 November 2022.
+3. Same uplift: inside the window each rate is 1.25 points above its value on
+   5 April 2022.
+4. Annual equivalent: the day-weighted average of each rate over 2022-23,
+   computed exactly, rounds to the Repeal Act's directors' rate.
+   fiscal_year_average gives the same figure (differential).
+
+And on the model:
+
+5. Same convention: neither rate is blended, so in every model year from 2015
+   to 2030 each annual rate is the stored rate at 30 April. Model year 2022 is
+   15.05% and 13.25%; 2021 and 2023 are 13.8% and 12%.
+"""
+
+import datetime
+from fractions import Fraction
+from pathlib import Path
+
+import pytest
+from hypothesis import example, given, settings
+from hypothesis import strategies as st
+from policyengine_core.parameters import load_parameter_file
+
+import policyengine_uk
+from policyengine_uk import CountryTaxBenefitSystem
+from policyengine_uk.utils.parameters import fiscal_year_average
+
+RATES = (
+    Path(policyengine_uk.__file__).parent
+    / "parameters"
+    / "gov"
+    / "hmrc"
+    / "national_insurance"
+    / "class_1"
+    / "rates"
+)
+EMPLOYER_FILE = RATES / "employer.yaml"
+EMPLOYEE_MAIN_FILE = RATES / "employee" / "main.yaml"
+
+LEVY_START = datetime.date(2022, 4, 6)  # HSCL Act 2021 s.5(1): tax year 2022-23
+LEVY_END = datetime.date(2022, 11, 6)  # Repeal Act 2022 s.2(1)
+TAX_YEAR_END = datetime.date(2023, 4, 6)
+
+EMPLOYER_LEVY_RATE = Fraction("0.1505")  # s.5(2)(b)
+EMPLOYEE_LEVY_RATE = Fraction("0.1325")  # s.5(2)(a)(i)
+UPLIFT = Fraction("0.0125")
+# Repeal Act 2022 Sch para 5(3), as percentages.
+EMPLOYER_DIRECTORS_RATE = Fraction("14.53")
+EMPLOYEE_DIRECTORS_RATE = Fraction("12.73")
+
+
+@pytest.fixture(scope="module")
+def employer():
+    return load_parameter_file(str(EMPLOYER_FILE), "employer")
+
+
+@pytest.fixture(scope="module")
+def employee_main():
+    return load_parameter_file(str(EMPLOYEE_MAIN_FILE), "main")
+
+
+@pytest.fixture(scope="module")
+def system():
+    return CountryTaxBenefitSystem()
+
+
+def rate_on(param, date):
+    """The stored rate in force on a date, as an exact fraction."""
+    return Fraction(str(param(date.isoformat())))
+
+
+def change_dates(param, start, end):
+    """Dates in [start, end) on which the stored rate takes a new value."""
+    dates = []
+    for value_at_instant in param.values_list:
+        date = datetime.date.fromisoformat(value_at_instant.instant_str)
+        if not start <= date < end:
+            continue
+        if rate_on(param, date) != rate_on(param, date - datetime.timedelta(days=1)):
+            dates.append(date)
+    return sorted(dates)
+
+
+def exact_annual_percentage(param, start, end):
+    """Day-weighted average of the stored rate over [start, end), in percent."""
+    total = Fraction(0)
+    day = start
+    while day < end:
+        total += rate_on(param, day)
+        day += datetime.timedelta(days=1)
+    return 100 * total / (end - start).days
+
+
+# Invariant 1: statutory window.
+@settings(max_examples=200, deadline=None, derandomize=True)
+@given(
+    date=st.dates(
+        min_value=datetime.date(2015, 4, 6),
+        max_value=datetime.date(2031, 4, 5),
+    )
+)
+@example(date=datetime.date(2022, 4, 1))
+@example(date=datetime.date(2022, 4, 5))
+@example(date=datetime.date(2022, 4, 6))
+@example(date=datetime.date(2022, 4, 30))
+@example(date=datetime.date(2022, 11, 5))
+@example(date=datetime.date(2022, 11, 6))
+@example(date=datetime.date(2023, 4, 5))
+def test_levy_rates_apply_only_in_the_statutory_window(employer, employee_main, date):
+    in_window = LEVY_START <= date < LEVY_END
+    assert (rate_on(employer, date) == EMPLOYER_LEVY_RATE) == in_window
+    assert (rate_on(employee_main, date) == EMPLOYEE_LEVY_RATE) == in_window
+
+
+# Invariant 2: same dates.
+def test_employer_and_employee_rates_change_on_the_levy_dates(employer, employee_main):
+    employer_dates = change_dates(employer, LEVY_START, TAX_YEAR_END)
+    employee_dates = change_dates(employee_main, LEVY_START, TAX_YEAR_END)
+    assert employer_dates == employee_dates == [LEVY_START, LEVY_END]
+
+
+# Invariant 3: same uplift.
+@pytest.mark.parametrize(
+    "date",
+    [LEVY_START, datetime.date(2022, 7, 6), LEVY_END - datetime.timedelta(days=1)],
+)
+def test_levy_adds_one_and_a_quarter_points_to_both_rates(
+    employer, employee_main, date
+):
+    day_before = LEVY_START - datetime.timedelta(days=1)
+    for param in (employer, employee_main):
+        assert rate_on(param, date) - rate_on(param, day_before) == UPLIFT
+
+
+# Invariant 4: annual equivalent, exact and via fiscal_year_average.
+@pytest.mark.parametrize(
+    "param_name, directors_rate",
+    [
+        ("employer", EMPLOYER_DIRECTORS_RATE),
+        ("employee_main", EMPLOYEE_DIRECTORS_RATE),
+    ],
+)
+def test_annual_average_matches_the_directors_rate(request, param_name, directors_rate):
+    param = request.getfixturevalue(param_name)
+    exact = exact_annual_percentage(param, LEVY_START, TAX_YEAR_END)
+    assert round(exact, 2) == directors_rate
+    assert 100 * fiscal_year_average(param, 2022) == pytest.approx(
+        float(exact), abs=1e-9
+    )
+
+
+# Invariant 5: same convention.
+def model_rates(system, year):
+    class_1 = system.get_parameters_at_instant(
+        str(year)
+    ).gov.hmrc.national_insurance.class_1
+    return class_1.rates.employer, class_1.rates.employee.main
+
+
+def test_neither_rate_is_blended(system):
+    rates = system.parameters.gov.hmrc.national_insurance.class_1.rates
+    for param in (rates.employer, rates.employee.main):
+        assert not (param.metadata or {}).get("fiscal_year_blend", False)
+
+
+@pytest.mark.parametrize("year", range(2015, 2031))
+def test_model_year_rate_is_the_rate_at_30_april(system, employer, employee_main, year):
+    model_employer, model_employee = model_rates(system, year)
+    sample = datetime.date(year, 4, 30)
+    assert Fraction(str(model_employer)) == rate_on(employer, sample)
+    assert Fraction(str(model_employee)) == rate_on(employee_main, sample)
+
+
+@pytest.mark.parametrize(
+    "year, employer_rate, employee_rate",
+    [
+        (2021, "0.138", "0.12"),
+        (2022, "0.1505", "0.1325"),
+        (2023, "0.138", "0.12"),
+    ],
+)
+def test_model_year_2022_carries_the_levy_on_both_sides(
+    system, year, employer_rate, employee_rate
+):
+    model_employer, model_employee = model_rates(system, year)
+    assert Fraction(str(model_employer)) == Fraction(employer_rate)
+    assert Fraction(str(model_employee)) == Fraction(employee_rate)

policyengine_uk/tests/test_ni_secondary_threshold.py

@@ -24,12 +24,13 @@
    From 2025-26 the stored value is the annual figure / 52 (5,000 / 52), the
    convention reg 11(3A)(c) uses for multiples of a week. The rounded reg
    10(d) £96 would give £4,992 (#1967).
-3. Differential: in every year except 2022-23, for any Class 1 earnings
-   e >= 0 of an earner aged 21 or over who is not an apprentice,
-   ni_class_1_employer equals rate x max(e - annual ST, 0), computed in exact
-   arithmetic from STATUTORY. 2022-23 is left out: the Health and Social Care
-   Levy raised the secondary percentage to 15.05% from 6 April to 5 November
-   2022, and the rate parameter does not carry it.
+3. Differential: in every year, for any Class 1 earnings e >= 0 of an
+   earner aged 21 or over who is not an apprentice, ni_class_1_employer
+   equals rate x max(e - annual ST, 0), computed in exact arithmetic from
+   STATUTORY. For 2022-23 the s.9(2) percentage at 6 April is 15.05% (Health
+   and Social Care Levy Act 2021 s.5(2)(b)). It applied to earnings paid
+   before 6 November 2022 (Repeal Act 2022 s.2(1)), and the model reads the
+   tax year at 30 April, as for the employee main rate (#1807).
 4. Threshold edge: employer NI is zero just below the annual ST, less than
    half a penny at it, and positive a penny above it. At the ST itself the
    stored 5,000 / 52 (96.153846) annualises to £4,999.999992, so exact
@@ -58,8 +59,8 @@
     2019: (Fraction(166), Fraction(8_632), Fraction(138, 1_000)),
     2020: (Fraction(169), Fraction(8_788), Fraction(138, 1_000)),
     2021: (Fraction(170), Fraction(8_840), Fraction(138, 1_000)),
-    # 15.05% from 6 April to 5 November 2022, then 13.8%.
-    2022: (Fraction(175), Fraction(9_100), None),
+    # 15.05% for earnings paid from 6 April to 5 November 2022, then 13.8%.
+    2022: (Fraction(175), Fraction(9_100), Fraction(1_505, 10_000)),
     2023: (Fraction(175), Fraction(9_100), Fraction(138, 1_000)),
     2024: (Fraction(175), Fraction(9_100), Fraction(138, 1_000)),
     2025: (Fraction(96), Fraction(5_000), Fraction(15, 100)),
@@ -199,5 +200,7 @@ def test_employer_ni_at_the_threshold_edge(year):
 # between £8,060 and £8,112 in 2016-17 were charged.
 @example(year=2025, earnings=[40_000.0, 4_996.0, 5_000.0])
 @example(year=2016, earnings=[8_100.0, 8_112.0, 20_000.0])
+# 2022-23 was charged at 13.8%, not the 15.05% levy rate.
+@example(year=2022, earnings=[30_000.0, 9_100.0, 100_000.0])
 def test_employer_ni_follows_the_statutory_threshold(year, earnings):
     check_employer_ni(year, earnings)