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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 - from April 2009: structural changes: the Class 1 and 2 maximum: examples: director with three directorships

Example 7

C Kent is a director of three companies. He receives no regular earnings from any of his companies but receives an annual bonus of £200,000 in each. His maximum Class 1 liability is calculated as follows:

Step 1

Deduct the relevant Primary threshold from the relevant UEL and multiply that figure by 53.

817 - 139 = 678 x 53 = 35934

Step 2

Multiply the result of step 1 by 12%

35934 x 12% = 4312.08

Step 3

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

42475 (annual UEL) - 7225 (annual PT) = 35250 x 3 = 105750

Step 4

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

105750 - 35934 = 69816

Step 5

If the figure produced at step 4 is a positive figure multiply that figure by 2%. If the figure produced at step 4 is a negative figure, it is treated for the purposes of step 8 as nil

69816 x 2% = 1396.32

Step 6

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

200,000 - 42475 = 157525 x 3 = 472575

Step 7

Multiply the result of step 6 by 2%

472575 x 2% = 9451.50

Step 8

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

4312.08 + 1396.32 + 9451.50 = 15159.90

C Kent maximum for the 2011/2012 tax year is £15159.90