The Social Security (Contributions) (Amendment No. 3) Regulations 2025

Published: Wed 12th Mar 25 Came into force: Sun 6th Apr 25

Department: Department for Work and Pensions
Made under: Social Security Contributions and Benefits Act 1992, Social Security Contributions and Benefits (Northern Ireland) Act 1992

The Social Security (Contributions) (Amendment No. 3) Regulations 2025 were enacted, amending the 2001 regulations to exclude qualifying tax redress payments from National Insurance contribution calculations for certain pension scheme members.

These regulations, effective April 6, 2025, amend the Social Security (Contributions) Regulations 2001.

They exclude the qualifying amount of tax redress payments from earnings calculations for Class 1 National Insurance contributions.

This applies to tax redress payments made to members of MPs', Senedd, and Northern Ireland Assembly pension schemes as compensation for tax liabilities arising from a pension calculation method change.

Arguments For

Intended Benefit: Simplifies the calculation of National Insurance contributions by exempting a specific type of payment from consideration.
Evidence Cited: References the Social Security Contributions and Benefits Act 1992 and the Finance Act 2024, providing a legal basis for the regulation changes.
Implementation Methods: The amendment directly inserts a new paragraph into Schedule 3 of the Social Security (Contributions) Regulations 2001.
Legal/Historical Basis: The regulations are made under the powers conferred by sections of the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

Arguments Against

Potential Impacts: Could slightly reduce National Insurance contributions collected, though unlikely to be significant relative to the overall income from National Insurance.
Implementation Challenges: Minimal implementation challenges are expected given the straightforward nature of the amendment.
Alternative Approaches: No apparent alternative approaches that would accomplish the same goal with equivalent efficiency and clarity were presented in the document.
Unintended Effects: No specific unintended effects were highlighted in the document.

The Treasury make these Regulations in exercise of the powers conferred by section 3(2) and (3) of the Social Security Contributions and Benefits Act 19921 and section 3(2) and (3) of the Social Security Contributions and Benefits (Northern Ireland) Act 19922 and now exercisable by them.

The Secretary of State and the Department for Communities concur in the making of these Regulations.

The Treasury created these regulations using the authority granted by sections 3(2) and 3(3) of the 1992 Social Security Contributions and Benefits Acts (for both England/Wales and Northern Ireland).

The Secretary of State and the Department for Communities both approved the regulations.

Citation and commencement1.

These Regulations may be cited as the Social Security (Contributions) (Amendment No. 3) Regulations 2025 and come into force on 6th April 2025.

These regulations are officially titled the Social Security (Contributions) (Amendment No. 3) Regulations 2025 and will take effect on April 6, 2025.

Amendment of the Social Security (Contributions) Regulations 20012.

In Part 6 of Schedule 3 to the Social Security (Contributions) Regulations 2001 (payments to be disregarded in the calculation of earnings for the purposes of earnings-related contributions)3, after paragraph 15 insert—

“The qualifying amount of a tax redress payment in respect of an MPs’, Senedd or Assembly pension scheme16.
(1)
The qualifying amount of a tax redress payment.
(2)
For the purposes of this paragraph—
(a)
“qualifying amount”, in relation to a tax redress payment, has the meaning given in regulation 7(3) of the MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 20254;
(b)
“tax redress payment” has the meaning given in section 15(4) of the Finance Act 20245.”.

This section amends the 2001 Social Security (Contributions) Regulations.

Specifically, it adds a new paragraph (paragraph 16) to Part 6 of Schedule 3.

This new paragraph clarifies that the 'qualifying amount' of a tax redress payment, as defined in other regulations and the Finance Act 2024, will be excluded from earnings when calculating National Insurance contributions.

The definitions of 'qualifying amount' and 'tax redress payment' are explicitly linked to other legislation, ensuring legal consistency.

The Secretary of State concurs.

Signed by the authority of the Secretary of State for Work and Pensions.

Stephen Timms Minister of State Department for Work and Pensions 6th March 2025

The Department for Communities concurs.

Sealed with the Official Seal of the Department for Communities on 6th March 2025.

David Tarr A senior officer of the Department for Communities

This section shows the signatures of approval.

The Secretary of State for Work and Pensions and the Department for Communities both concur with and approve these regulations.

EXPLANATORY NOTE (This note is not part of the Regulations)

These Regulations amend the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) to provide that the qualifying amount of a tax redress payment, as defined in section 15(4) of the Finance Act 2024 (c. 3), will be disregarded in the calculation of earnings for the purpose of establishing liability to Class 1 National Insurance contributions.

Tax redress payments are made to members of affected pension schemes for Members of Parliament, Members of the Senedd and members of the Northern Ireland Assembly as a result of a rectification exercise conducted in connection with the transfer of members’ pension benefits from a final salary to a career average method of calculation, as compensation for an amount paid in respect of an income tax liability for any tax year that would not have arisen if the rectification exercise had been retrospective. The MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 2025 (S.I. 2025/52) exempt the qualifying amount of a tax redress payment from income tax and specify how the qualifying amount is to be calculated.

A Tax Information and Impact Note covering this instrument was published on 22nd November 2023 alongside the Autumn Statement and is available on the website at https://www.gov.uk/go vernment/collections/tax-information-and-impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.

This explanatory note summarizes the legislation's impact.

It clarifies that the amendment to the 2001 regulations excludes a specific type of tax redress payment from National Insurance contributions.

These payments compensate members of certain parliamentary pension schemes for tax liabilities resulting from a pension calculation change, are exempt from income tax (per other regulations), and their qualifying amount is now excluded from National Insurance calculations.

Explanatory Memorandum PDF View Source

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