ESM8170 - Basic principles: how to work out the deemed employment payment where the intermediary has income that is not from relevant engagements - example
Mr F works through a service company, F Services Ltd, in which he owns all of the shares. F Services Ltd receives £60,000 during the year of which:
- £40,000 is in respect of relevant engagements and
- £20,000 from other business activities which do not fall within the rules.
F Services Ltd incurs the following expenses during the course of the year:
- Mr F is paid a salary of £20,000
- the employer’s NICs on the salary is £1,905
- employer’s pension contributions of £4,000
- travel costs relating to relevant engagements £500
The deemed payment is calculated as follows:
*Step 6 - calculated by using salary paid in year, less the annual earnings threshold for secondary Class 1 NICs, multiplied by 15%. 2025-26 rates used in example.
Step |
- |
Amount |
Amount |
|---|---|---|---|
Step One |
Income from relevant engagements |
- |
40,000 |
- |
Deduct |
- |
- |
Step One |
5% flat rate allowance |
2,000 |
- |
Step Three |
Expenses |
500 |
- |
Step Five |
Pension contributions |
4,000 |
- |
Step Six |
Employer’s NICs paid in year |
2250* |
- |
Step Seven |
Salary paid in year |
20,000 |
- |
- |
Total deductions |
28,750 |
- |
- |
Net amount |
- |
11,250 |
Step Eight |
Employer’s NICs on deemed payment |
- |
1,468 |
Step Nine |
Deemed payment |
- |
9782 |