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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 exceed ET but do not reach UEL: 1999 to 2000 tax year

All examples on this page use the 1999 to 2000 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:

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

Employer’s contributions are worked out at the:

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

Example 

J. Thomas earns £450 per month from his not contracted-out job, and £600 per month from his contracted-out job. Total earnings are £1,050 per month and the earnings period is monthly.

Employee’s NICs due: £16.40 (Table letter A) + £50.40 (Table letter D)

Employer’s NICs due: £10.86 (Table letter A) + £55.20 (Table letter D)

Recording the NICs due on form P11

NICs will need to be recorded on two separate forms P11 and the end of year totals on one P14, with a separate entry for both the contracted-out and not 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 up to and including the LEL (where earnings reach or exceed the LEL) Earnings above the LEL, up to and including the Earnings Threshold Earnings above the Earnings Threshold, up to and including the UEL Total of employee’s and employer’s contributions payable Employee’s contributions payable Employer’s NICs rebate due on amount in 1b
           
Whole pounds only Whole pounds only Whole pounds only      
1a 1b 1c 1d 1e 1f
£286 £75 £89 £27.26 £16.40  

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

National Insurance contributions

Earnings up to and including the LEL (where earnings reach or exceed the LEL) Earnings above the LEL, up to and including the Earnings Threshold Earnings above the Earnings Threshold, up to and including the UEL Total of employee’s and employer’s contributions payable Employee’s contributions payable Employer’s NICs rebate due on amount in 1b
           
Whole pounds only Whole pounds only Whole pounds only      
1a 1b 1c 1d 1e 1f
£0 £0 £600 £105.60 £50.40  

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

NICs Table letter Earnings up to and including the LEL (where earnings reach or exceed the LEL) Earnings above the LEL, up to and including the Earnings Threshold Earnings above the Earnings Threshold, up to and including the UEL Total of employee’s and employer’s contributions Employee’s contributions payable Employer’s NICs rebate due on amount in 1b
             
  Whole pounds only Whole pounds only Whole pounds only      
  1a 1b 1c 1d 1e 1f
A £3,432 £900 £1,068 £327.12 £196.80  
D £0 £0 £7,200 £1,267.20 £604.80