Make the salary sacrifice NI measures equal the change in Class 1 liability, and correct mis-declared units

changelog.d/2361.fixed.md

@@ -0,0 +1 @@
+- The salary sacrifice National Insurance measures (`salary_sacrifice_pension_ni_employee` and `salary_sacrifice_pension_ni_employer`) now equal the change in the Class 1 liability from the NIC-only salary sacrifice pension excess: an amount crossing the upper earnings limit is split between the main and additional rates, and the thresholds and age conditions apply. No tax total changes.

changelog.d/2362.fixed.md

@@ -0,0 +1 @@
+- Corrected units: `shareholding` and `consumption_shareholding` are shares (`/1`, so a month's value is no longer a twelfth of the share), `free_tv_licence_value` is in pounds, and seven true/false variables (`sdlt_liable`, `lbtt_liable`, `benunit_is_rent_liable`, the three Pension Credit eligibility flags and `car_is_ved_exempt`) no longer declare a unit. No yearly value changes.

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

@@ -27,7 +27,7 @@
     # £250 excess * 8% = £20
     salary_sacrifice_pension_ni_employee: (2_250 - 2_000) * 0.08
 
-- name: Employee NI charge at 8% main rate for earner just below UEL
+- name: Employee NI excess crosses UEL when pay is just below it
   period: 2025
   absolute_error_margin: 0.01
   input:
@@ -37,8 +37,8 @@
     gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
     gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
   output:
-    # £8,000 excess * 8% = £640
-    salary_sacrifice_pension_ni_employee: (10_000 - 2_000) * 0.08
+    # The excess spans both the main and additional rate bands.
+    salary_sacrifice_pension_ni_employee: (50_269.96 - 50_000) * 0.08 + (58_000 - 50_269.96) * 0.02
 
 - name: Employee NI charge at 2% additional rate for high earner above UEL
   period: 2025
@@ -107,6 +107,124 @@
     salary_sacrifice_pension_ni_excess: 1_000
     salary_sacrifice_returned_to_income: 0
 
+# The cases below set only the pay (employment_income_before_lsr), so
+# ni_class_1_income is pay plus NIC-only excess. The charge is the
+# employee Class 1 liability on those earnings less the liability without the
+# NIC-only excess. 2025 thresholds: primary threshold 241.73 x 52 = 12,569.96,
+# upper earnings limit 966.73 x 52 = 50,269.96.
+- name: Amount returned straddles the upper earnings limit
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 48_000
+    pension_contributions_via_salary_sacrifice: 6_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    salary_sacrifice_pension_ni_excess: 4_000
+    employment_income: 48_000
+    # 8% from 48,000 to the limit, 2% from the limit to 52,000 = 216.20.
+    # (A single rate on the whole amount would give 4,000 x 2% = 80.)
+    salary_sacrifice_pension_ni_employee: (50_269.96 - 48_000) * 0.08 + (52_000 - 50_269.96) * 0.02
+
+- name: Amount returned stays below the primary threshold
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 6_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    employment_income: 6_000
+    # Earnings of 9,000 are below the threshold, so no contributions are due.
+    ni_class_1_employee: 0
+    salary_sacrifice_pension_ni_employee: 0
+
+- name: Amount returned straddles the primary threshold
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 11_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    employment_income: 11_000
+    # Only the part above the threshold is charged: 1,430.04 x 8% = 114.40.
+    ni_class_1_employee: (14_000 - 12_569.96) * 0.08
+    salary_sacrifice_pension_ni_employee: (14_000 - 12_569.96) * 0.08
+
+- name: No employee charge over State Pension age
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 70
+    employment_income_before_lsr: 45_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    salary_sacrifice_pension_ni_excess: 3_000
+    # Primary contributions end at pensionable age (SSCBA 1992 s.6(3)).
+    ni_class_1_employee: 0
+    salary_sacrifice_pension_ni_employee: 0
+
+- name: No employee charge under 16
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 15
+    employment_income_before_lsr: 20_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    salary_sacrifice_pension_ni_excess: 3_000
+    ni_class_1_employee: 0
+    salary_sacrifice_pension_ni_employee: 0
+
+- name: Statutory pay counts towards the upper earnings limit
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 46_000
+    statutory_sick_pay: 3_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    employment_income: 46_000
+    ni_class_1_income: 52_000
+    # Class 1 earnings are 52,000 with the 3,000 excess and 49,000 without.
+    salary_sacrifice_pension_ni_employee: (50_269.96 - 49_000) * 0.08 + (52_000 - 50_269.96) * 0.02
+
+- name: Worked example in the salary sacrifice cap research post
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    # A 50,000 salary with 5,000 sacrificed leaves pay of 45,000.
+    employment_income_before_lsr: 45_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    employment_income: 45_000
+    # Earnings stay below the upper earnings limit: 3,000 x 8% = 240.
+    salary_sacrifice_pension_ni_employee: 240
+
+- name: Current law in 2029, with the cap and the broad-base haircut
+  period: 2029
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 48_000
+    pension_contributions_via_salary_sacrifice: 6_000
+  output:
+    salary_sacrifice_pension_ni_excess: 4_000
+    # Cash earnings exclude the £4,000 NIC-only excess and lose the £76.80 haircut.
+    employment_income: 47_923.20
+    salary_sacrifice_pension_ni_employee: (50_269.96 - 47_923.20) * 0.08 + (51_923.20 - 50_269.96) * 0.02
+
 - name: Broad-base haircut reduces all workers employment income
   period: 2025
   absolute_error_margin: 1

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

@@ -103,6 +103,99 @@
   output:
     # £1,000 excess * 15% = £150
     salary_sacrifice_pension_ni_employer: (3_000 - 2_000) * 0.15
-    # Full excess enters NIC earnings (no targeted haircut)
+    # Full excess enters NIC-only earnings (no targeted haircut)
     salary_sacrifice_pension_ni_excess: 1_000
     salary_sacrifice_returned_to_income: 0
+
+# The cases below set only the pay (employment_income_before_lsr), so
+# ni_class_1_income is pay plus NIC-only excess. The charge is the
+# employer Class 1 liability on those earnings less the liability without the
+# NIC-only excess. 2025 secondary threshold: 96.153846 x 52 = 5,000.
+- name: Amount returned stays below the secondary threshold
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 1_500
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    employment_income: 1_500
+    ni_class_1_income: 4_500
+    # Earnings of 4,500 are below the threshold, so no contributions are due.
+    # (The rate on the whole amount would give 3,000 x 15% = 450.)
+    ni_class_1_employer: 0
+    salary_sacrifice_pension_ni_employer: 0
+
+- name: Amount returned straddles the secondary threshold
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 3_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    employment_income: 3_000
+    ni_class_1_income: 6_000
+    # Only the part above the threshold is charged: 1,000 x 15% = 150.
+    ni_class_1_employer: (6_000 - 5_000) * 0.15
+    salary_sacrifice_pension_ni_employer: (6_000 - 5_000) * 0.15
+
+- name: Employer charge continues over State Pension age
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 70
+    employment_income_before_lsr: 45_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    # Secondary contributions have no upper age limit (SSCBA 1992 s.6(3)).
+    salary_sacrifice_pension_ni_employer: 3_000 * 0.15
+
+- name: No employer charge under 16
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    age: 15
+    employment_income_before_lsr: 20_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+  output:
+    salary_sacrifice_pension_ni_excess: 3_000
+    ni_class_1_employer: 0
+    salary_sacrifice_pension_ni_employer: 0
+
+- name: Employer pension contributions count when they are not exempt
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 1_500
+    employer_pension_contributions: 2_000
+    pension_contributions_via_salary_sacrifice: 5_000
+    gov.hmrc.national_insurance.salary_sacrifice_pension_cap: 2_000
+    gov.contrib.behavioral_responses.salary_sacrifice_broad_base_haircut_rate: 0
+    gov.contrib.policyengine.employer_ni.exempt_employer_pension_contributions: false
+  output:
+    employment_income: 1_500
+    ni_class_1_income: 4_500
+    # Charged earnings are 4,500 + 2,000 = 6,500 with the 3,000 excess and
+    # 3,500 without: (6,500 - 5,000) x 15% = 225.
+    ni_class_1_employer: (6_500 - 5_000) * 0.15
+    salary_sacrifice_pension_ni_employer: (6_500 - 5_000) * 0.15
+
+- name: Current law in 2029, with the cap and the broad-base haircut
+  period: 2029
+  absolute_error_margin: 0.01
+  input:
+    employment_income_before_lsr: 48_000
+    pension_contributions_via_salary_sacrifice: 6_000
+  output:
+    salary_sacrifice_pension_ni_excess: 4_000
+    employment_income: 47_923.20
+    ni_class_1_income: 51_923.20
+    # Earnings stay above the secondary threshold: 4,000 x 15% = 600.
+    salary_sacrifice_pension_ni_employer: 4_000 * 0.15