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HMRC internal manual

Employment Status Manual

Basic principles: how to work out the deemed payment: step eight - example

This example is also reproduced at ESM8235 using 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:


the deemed payment is equal to


= 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.