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HMRC internal manual

Employment Status Manual

From
HM Revenue & Customs
Updated
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How to work out the deemed payment: Step Eight - example

This example is also reproduced at ESM3172using a step by step guide.

Ms G is a worker whose service company has earned income from a relevant engagement. The service company paid her a salary of £3,000 during the year. The amount at Step Seven is £30,000. This produces the following figures:

x = Earnings to date 3,000
       
y = The amount at Step Seven 30,000
a = The secondary Class 1 NICs threshold 4,385
b = The secondary Class 1 NICs percentage rate 12.2%

Using the formula:

((y-(a-x))x100/(100+b))+(a-x),

the deemed payment is equal to

((30,000-(4,385-3,000))*100/(100+12.2))+(4,385-3,000)

= 30,000-1,385*100/112.2+1,385

= £26,888

The secondary Class 1 NICs payable in respect of the deemed payment are £3,112.