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HMRC internal manual

National Insurance Manual

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Aggregation of Earnings: Calculation and recording: NICs due at contracted-out and not contracted-out rate: No Appropriate Personal Pension (APP) in place: Contracted-out earnings reach or exceed UEL: 2001 to 2002 tax year

All examples on this page use the 2001 to 2002 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 contracted-out percentage rate on contracted-out earnings above the ET up to and including the UEL. Employer’s NICs are worked out at the:

  • appropriate contracted-out percentage rate on contracted-out earnings above the ET up to and including the UEL
  • appropriate not contracted-out percentage rate on the balance of the total earnings.

Example

N. Phillips earns £2,500 per month from his contracted-out job and £800 per month from his not contracted-out job. Total earnings are £3,300 per month and the earnings period is monthly.

Employee’s NICs due: £177.58 (Table letter D)

Employer’s NICs due: £284.30 (Table letter D)

Employee’s NICs rebate due: £1.06

Employer’s NICs rebate due: £1.98

Recording the NICs due on form P11

NICs will be recorded on one form P11 under contribution Table letter D and the end of year totals, again under contribution Table letter D, on one form P14. The entries on the P11 will be as follows:

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 Earnings Threshold, up to and including the UEL Total of employee’s and employer’s contributions payable Employee’s contributions payable on earnings in 1c (before deducting employee’s NIC rebate in 1f) Employee’s NIC rebate due on earnings in 1b (to be deducted from contributions in 1e) Employer’s NIC rebate due on earnings in 1b and any balance of employee’s NIC rebate due but not shown in 1f
1a 1b 1c 1d 1e 1f 1g
£312 £66 £2,114 £461.88 £177.58 £1.06 £1.98

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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 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 on earnings in 1c (before deducting employee’s NIC rebate in 1f)
           
  Whole pounds only Whole pounds only Whole pounds only    
  1a 1b 1c 1d 1e
D £3,744 £792 £25,368 £5,542.56 £2,130.96
    1f   1f + 1g  
  Employee’s NICs rebate to be deducted from contributions in 1e £12.72 Total of employee’s and employer’s NICs rebate due on 1b £36.48