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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1 Structural Overview: Earnings limits and brackets and NICs rebate: 1998 to 1999 and earlier tax years

Earnings limits and brackets

For 1998 to 1999 and earlier tax years, there was a Lower Earnings Limit (‘LEL’, see NIM01005), and for employers, five Earnings Brackets.  There was also an Upper Earnings Limit (‘UEL’) which was the maximum amount of earnings upon which primary Class 1 NICs were payable (see NIM01009).  For further guidance on calculating and recording NICs, including NICs rates, see NIM11000 onwards. If aggregation of earnings is involved (NIM01004), see also NIM10000 onwards.

NICs rebate

Where employers operate contracted-out pension schemes, they and their employees who are members of the schemes receive a reduction in their NICs. The reduction, for both employees and employers, is realised via a reduction in the NICs percentage rate applied to earnings between the LEL and the UEL. The percentage rate differs for employees and employers and for the different types of contracted-out schemes. The difference between the full contracted- out rate and this reduced rate is known as the ‘NICs rebate’.

For further information about contracting-out, see NIM01017.  For further guidance on calculating and recording the NICs rebate, including rebated rates, see NIM11000 onwards. If aggregation of earnings is involved (NIM01004), see also NIM10000 onwards.