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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Aggregation of Earnings: Calculation and recording: NICs due at contracted-out and not contracted-out rate: Appropriate Personal Pension (APP) in place: Not contracted-out earnings reach or exceed LEL but do not reach UEL: Tax years 1998 to 1999

All examples on this page use the 1998-99 rates and earnings bands. NICs are worked out using the exact percentage method and are based on the employee being a member of a Contracted-Out Salary Related (COSR) scheme.

When calculating NICs, priority is given to the contracted-out earnings. NICs are worked out on the total earnings using the shortest earnings period of the contracted-out employment(s).

Employee’s NICs are worked out at the:

  • initial percentage rate on earnings up to and including the LEL
  • main not contracted-out percentage rate on the balance of any not contracted-out earnings
  • main contracted-out percentage rate on contracted-out earnings until the total earnings reach the UEL.

Employer’s contributions are worked out at the:

  • appropriate not contracted-out rate on the not contracted-out earnings
  • appropriate contracted-out rate on the contracted-out earnings until the total earnings reach the UEL
  • highest not contracted-out rate on any earnings above the UEL.

Example 

P. Brown earns £150 per week from his not contracted-out job, and £300 per week from his contracted-out job. Total earnings are £450 per week and the earnings period is weekly.

Employee’s NICs due: £9.88 (Table letter A) + £25.20 (Table letter D)

Employer’s NICs due: £15.00 (Table letter A) + £21.00 (Table letter D)

Recording the NICs due on form P11

NICs will be recorded on two separate forms P11. The end of year totals will be recorded on one P14, with separate entries for both the not contracted-out and contracted-out NICs under their appropriate contribution Table letters. For not contracted-out NICs, the entries on the P11 will be as follows:

National Insurance contributions

Earnings on which employee’s contributions payable Total of employee’s and employer’s contributions payable Employee’s contributions payable Earnings on which employee’s contributions at contracted-out rate payable included in 1a Employee’s contributions at contracted-out rate included in 1c
         
Whole pounds only     Whole pounds only  
1a 1b 1c 1d 1e
£150 £24.88 £9.88    

For contracted-out NICs, the entries on the P11 will be as follows:

National Insurance contributions

Earnings on which employee’s contributions payable Total of employee’s and employer’s contributions payable Employee’s contributions payable Earnings on which employee’s contributions at contracted-out rate payable included in 1a Employee’s contributions at contracted-out rate included in 1c
         
Whole pounds only     Whole pounds only  
1a 1b 1c 1d 1e
£300 £46.20 £25.20 £300 £25.20

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Recording the end of year totals on form P14

The entries below assume the level of earnings remained unchanged throughout the year.

National Insurance contributions in this employment

Contribution Table letter Earnings on which employee’s contributions payable Total of Employee’s and Employer’s contributions payable Employee’s contributions payable Earnings on which employee’s contributions at Contracted-out rate payable included in 1a Employee’s contributions at Contracted-out rate included in 1c
           
  Whole pounds only     Whole pounds only  
  1a 1b 1c 1d 1e
A £7,800 £1,293.76 £513.76    
D £15,600 £2,402.40 £1,310.40 £15,600 £1,310.40