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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1 Structural Overview - post April 2003: Structural changes: The Class 1 and 2 maximum: Examples: Two Class 1 employment and self-employment: No Class 2 due

Example 4

F Fox is both employed and self-employed. His total earnings for the 2003/2004 from hisClass 1 employments are £48,000. He is paid £2000 per month in each employment. Hismaximum Class 1and 2 liability is calculated as follows:

Step 1

Deduct the relevant Primary threshold from the relevant UEL and multiply that figure by53.

595 - 89 = 506 x 53 = 26818

Step 2

Multiply the result of step 1 by 11%

26818 x 11% = 2949.98

Step 3

Add together so much of the person’s earnings from each employed earner’semployment as exceeded the Primary Threshold but did not exceed the Upper Earnings Limit.

2000 (monthly UEL) - 385 (monthly PT) = 1615 x 24 = 38760

Step 4

Deduct from the total found at step 3 the amount produced by step 1

38760 - 26818 = 11942

Step 5

If the figure produced at step 4 is a positive figure multiply that figure by 1%

If the figure produced at step 4 is a negative figure, it is treated for thepurposes of step 8 as nil

11942 x 1% = £119.42

Step 6

Add together so much of the person’s earnings from each employment as exceeded theUpper Earnings Limit.

There are no earnings above the Upper Earnings Limit

Step 7

Multiply the result of step 6 by 1%

Nil

Step 8

Add together the results of steps 2, 5 and 7.

£2949.98 + 119.42 + Nil = £3069.40

F Fox’s maximum for the 2003/2004 tax year is £3069.40

Since Mr Fox will have met his maximum by payment of Class 1 NICs, no payment of Class 2NICs is required. This is because his earnings between the PT and the UEL exceed £26818and he will have pay Class 1 NICs at the main primary percentage of 11% on earningsequivalent to 53 x the UEL less the PT, plus the required additional 1%.