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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 employee’s ET (EE/ET) but do not reach employer’s ET (ER/E

All examples on this page use the 2000 to 2001 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 not contracted-out earnings above the EE/ET
  • appropriate contracted-out percentage rate on contracted-out earnings until the total earnings reach the UEL.

Employer’s contributions are worked out at the appropriate contracted-out percentage rate on the total earnings above the ER/ET.

Example

B. Sampson earns £350 per month from his not contracted-out job and £450 per month from his contracted-out job. Total earnings are £800 per month and the earnings period is monthly.

Employee’s NICs due: £2.10 (Table letter A) + £37.80 (Table letter D)

Employer’s NICs due: £40.02 (Table letter D)

Employee’s NICs rebate: £0.00

Employer’s NICs rebate: £0.45

Recording the NICs due on form P11

NICs will be recorded on two separate P11s - one for the not contracted-out NICs and one for the contracted-out NICs. One form P14 should be completed at the end of the year showing two separate entries - one for the not contracted-out NICs and one for the contracted-out NICs under their appropriate contribution Table letters. The entries on the P11 will be as follows:

For not contracted-out NICs

National Insurance contributions

Note: LEL = Lower Earnings Limit, UEL = Upper Earnings Limit.

Earnings details Contribution details Rebate details          
               
Earnings at the LEL (where earnings reach or exceed the LEL) Earnings above the LEL, up to and including the employee’s Earnings Threshold Earnings above the employee’s Earnings Threshold, up to and including the employer’s Earnings Threshold Earnings above the employer’s Earnings Threshold, up to and including the UEL Total of employee’s and employer’s contributions payable Employee’s contributions payable NICs rebate due on amount in column 1b NICs rebate due on the sum of the amounts in columns 1b and 1c
1a 1b 1c 1d 1e 1f 1g 1h
£291 £38 £21 £0 £2.10 £2.10    

For contracted-out NICs

National Insurance contributions

Note: LEL = Lower Earnings Limit, UEL = Upper Earnings Limit.

Earnings details Contribution details Rebate details          
               
Earnings at the LEL (where earnings reach or exceed the LEL) Earnings above the LEL, up to and including the employee’s Earnings Threshold Earnings above the employee’s Earnings Threshold, up to and including the employer’s Earnings Threshold Earnings above the employer’s Earnings Threshold, up to and including the UEL Total of employee’s and employer’s contributions payable Employee’s contributions payable NICs rebate due on amount in column 1b NICs rebate due on the sum of the amounts in columns 1b and 1c
1a 1b 1c 1d 1e 1f 1g 1h
£0 £0 £15 £435 £77.82 £37.80 £0.00 £0.45

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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

Note: LEL = Lower Earnings Limit, UEL = Upper Earnings Limit.

NICs Table letter Earnings at the LEL (where earnings reach or exceed the LEL) Earnings above the LEL, up to and incl. The employee’s Earnings Threshold Earnings above the employee’s Earnings Threshold, up to and incl. The employer’s Earnings Threshold Earnings above the employer’s Earnings Threshold, up to and incl. The UEL Total of employee’s and employer’s contributions Employee’s contributions payable
             
  Whole pounds only Whole pounds only Whole pounds only Whole pounds only    
  1a 1b 1c 1d 1e 1f
A £3,492 £456 £252 £0 £25.20 £25.20
D £0 £0 £180 £5,220 £933.84 £453.60
    1g/1h   1i   1j
  NICs rebate due £5.40 Statutory Sick Pay   Statutory Maternity Pay