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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
Updated
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Class 1 structural overview from 6 April 2009: assessing primary Class 1 NICs from 6 April 2009: example: earnings are consistently above the Upper Earnings Limit - contracted-out

Mr S Summers is an employee in a contracted-out employment with earnings of £4,000 per month. He is employed for the whole of the 2012/2013 tax year.

In April 2012 the following primary Class 1 NICs will be due:

Earnings on which the main primary percentage is payable:

£3540 (monthly UEL) less £634 (monthly PT) = £2906

£2906 x 12% (main primary percentage) = £348.72

Earnings which attract the NIC Rebate

£3337 (Monthly UAP) less £464 (Monthly LEL) = £2873

£2873 x 1.4% (NIC Rebate) = £40.22

Earnings on which the additional primary percentage is payable:

£4000 (total earnings) less £3540 (monthly UEL) = £460

£460 x 2% (additional primary percentage) = £9.20

Total primary payable for April 2012 = £317.70 (that is £348.72 + £9.20 - £40.22)

As Mr Clarke remains employed for the whole of the 2012/2013 tax year with the same employer, the following primary Class 1 NICs will be due:

£317.70 x 12 monthly deductions = £3812.40

For the 2012/2013, Mr Summers will have paid:

  • main primary NICs amounting to £4184.64
  • additional primary NICs amounting to £110.40
  • less a NIC rebate amounting to £482.64

See NIM01221 for general information relating to this example.