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HMRC internal manual

National Insurance Manual

Class 1 Structural Overview from 6 April 2003: Assessing primary Class 1 NICs from 6 April 2003: Examples: General


The examples provided at NIM01117 and NIM01118 illustrate how the calculation of Class 1 NICs operates for two contributors whose annual earnings are the same but whose pattern of earnings differs. Both employees have total annual earnings of £36,000 but the pattern of payments dictates a differing Class 1 NICs liability. Both employees are paid monthly.

It is important to note that, whilst prior to the introduction of a primary liability on earnings above the UEL, the same level of annual earnings paid in differing patterns could result in differing liabilities, the new liability does not require earnings to reach fifty-two (or fifty-three) times the Upper Earnings Limit before it becomes due.  In the following examples, one employee has earnings which consistently exceed the monthly UEL, the other exceeds the monthly UEL only once.

Employee 1, Mr A Adams, who is paid £3000 per month and has an annual salary of 36,000, has a primary liability of £2946.60, see NIM01117.

Employee 2, Mr B Brown, who is paid £2000 per month but receives an annual bonus of £12,000 in March 2004 and has an annual salary of £36,000, has a primary liability of £2309.70, see NIM01118.

The examples use the rates, limits and thresholds applicable to the 2003 to 2004 tax year.The calculations use the exact percentage method.