Employees are liable to pay Class 1 NIC on their earnings. Additionally, a further secondary contribution is due from the employer.
For tax year 2016/17 employee contributions are only due when earnings exceed a ‘primary threshold’ of £155 per week (£8,060 a year). The amount of NIC payable is 12% of the earnings above £155 up to earnings of £827 a week (£43,000 a year) the Upper Earnings Limit (UEL). Additionally, there is a further 2% NIC charge on weekly earnings above the UEL. Secondary contributions (Employers NIC) are due from the employer of 13.8% of earnings above the ‘secondary threshold’ of £156 per week for 2016/17 (£8,112 a year). However, there is no upper limit on the employer’s contributions, so 13.8% is paid on everything above £156 a week.
Under 21s Employer NIC
For those under the age of 21, the employers NIC are reduced from the normal rate of 13.8% to 0%. However, the above exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period. The UST is set at the same amount as the UEL. This is the amount of pay at which employees’ NIC fall from 12% to 2%. The weekly UST is £827 a week (£43,000 a year) for 2016/17. So, the employers will be liable to 13.8% NIC beyond this limit. However, the employee will still be liable to pay employee NIC.
Apprentices under 25 NIC
From 6 April 2016, the same as for under 21s, employer NICs are 0% for apprentices under 25 who earn less than the upper secondary threshold (UST) which is £827 per week (£43,000 a year). On pay above the UST, employers are liable to 13.8% NIC. Employee NICs are payable as normal.
An apprentice needs to:
- be working towards a government recognised apprenticeship in the UK which follows a government approved framework/standard
- have a written agreement, giving the government recognised apprentice framework or standard, with a start and expected completion date.
In order to identify the apprentices, the employers need to assign them NIC category letter H. This ensures that the correct NICs are collected.
When the apprenticeship ends, or the employee turns 25, the employer needs to ensure that they amend the contributions letter.
Benefits in kind
If the employers provide benefits such as company cars for employees, they have a further NIC liability under Class 1A. Contributions are payable on the amount charged to income tax as a taxable benefit.
Most of the benefits are subject to employer’s NI. The current rate of Class 1A for the benefits provided is the same as the employer’s secondary contribution rate of 13.8%.
If you need help with NICs, please contact us at Adiva Accountants London for further advice.