NIM07071 - Class 1 NICs: Payments made under employment legislation: Re-allocating primary NICs paid on a payment made under a reinstatement order, a re-engagement order, an order for the continuation of a contract of employment or a protective award:
How to apportion the amount of NICs paid between tax years: Example
Employer Z makes a payment under a re-engagement order – see NIM07030 – NIM07031 – to an employee on 31 July 2025. The gross amount of the payment is £4,000 and is in respect of the period 7 March 2025 to 31 May 2025, which is 86 days.
The employee’s earnings in the 2024 to 25 tax year were slightly insufficient to make the year qualifying for benefit/pension purposes. They have worked out that they can make the 2024 to 2025 tax year a qualifying one if the NICs they paid in the 2025 to 26 tax year on the re-engagement order payment are re-allocated to the 2024 to 2025 tax year. So they write to HMRC and ask for this to be done.
Employer’s calculation of earnings limits and amount of primary NICs due
Employer Z has calculated:
- the lower earnings limit (LEL); and
- the Primary Threshold (PT); and
- the amount of primary NICs due on the payment
as follows:
| Item | Calculation | Result |
|---|---|---|
| LEL | £125 (normal weekly LEL) ( 7 x 86) | £1535.71 |
| PT | £12,570 (normal PT) (365 x 86) | £2962.00 (rounded up to nearest pound) |
| Primary NICs due | £4,000 - £2,962 = £1038 x 8% (main primary NIC rate) | £83.04 |
Calculation of the amount of primary NICs to be re-allocated
| Item | Calculation | Result |
|---|---|---|
| The number of days in the earnings period that falls in the 2025/26 tax year | 6 April 2025 to 31 May 2025 | 56 days |
| The amount of the gross payment that falls in the 2025/26 tax year | £4,000 x 56 ( 86) | £2604.56 |
| The amount of primary NICs payable on £2,604.65 | £83.04 x 56 ( 86) | £54.07 |
| The number of days in the earnings period that falls in the 2024/25 tax year | 7 March 2025 to 5 April 2025 | 30 days |
| The amount of the gross payment that falls to be re-allocated to 2024/25 tax year | £4,000-£2604.56 | £1395 this the amount to be reallocated to the tax year 2024/25 |
| The amount of primary NICS payable on £1395.35 | £83.04-£54.07 | £28.97 this is the amount to be reallocated to the tax year 2024/25 |