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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: changes to the deferment process from 6 April 2009

There have been no structural changes to the deferment process since April 2009. For more information about the deferment process See NIM01180.

From 6 April 2009 the Upper Accrual Point (UAP) was introduced as part of the Pension Act 2008 and the NICs Act 2009 and is the point at which calculation of State Second Pension (S2P) ends. The UAP was set at the 2008-09 UEL and will be frozen until S2P becomes payable at a flat rate. The UAP impacts contracted out employment from 2009-10, as the employee (and Employer) will pay NICs at the contracted out rate to the UAP (10.4%) and at the standard rate from the UAP to the UEL (12%).

There have been changes to the rates of NICs from April 2011 and for the 2011/2012 tax year onwards, an employee who is granted deferment will be required to pay:

  • Class 1 NICs at the relevant percentage rates on all earnings above the Primary Threshold in the non deferred employments
  • Class 1 NICs at a rate of 2% (from 6 April 2011) on all earnings above the Primary Threshold in any deferred employment.

From 6 April 2012, Contracting out of the additional State Pension on a Defined Contribution basis was abolished. This means that, from the 2012-13 tax year the NICs category letters F, G, H, K, V and S are obsolete

Deferment Services at NIC&EO will continue to deal with all deferment applications. At the end of the year Deferment Services will review each deferment case and arrange to collect any underpayments or refer the case to Payment Reconciliation who will arrange to refund any overpayment where necessary.

Employers whose employees are granted deferment will be advised to deduct Class 1 primary NICs at a rate of 2% on all earnings above the Primary Threshold and will be required to report the payments on forms P14 and P35.

Any underpayment of the 2% will remain the responsibility of the employer. Any other underpayment arising because the anticipated earnings in the non deferred employments did not materialise will remain the responsibility of the employee.