Aggregation of earnings: examples: contracted-out and not contracted-out: no Appropriate Personal Pension (APP) held: contracted-out earnings exceed UEL
This example uses 2015 to 2016 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 where no APP is held, 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).
S. Davies has 2 jobs with the same employer. He earns £5,000 per month from his contracted-out job and £1,200 per month from his not-contracted-out job. The total earnings are £6,200 per month and the earnings period is monthly.
Employee’s NICs are worked out at the:
- main percentage rate on any earnings above the PT up to and including the UEL (less the employee’s contracted-out rebate on earnings between LEL and UAP)
- additional primary percentage on earnings above the UEL
Employer’s NICs are worked out at the:
- main secondary percentage rate on earnings above the ST as far as the earnings from the contracted-out employment go (less the employer’s contracted-out rebate on earnings which exceed the LEL)
- main secondary percentage on earnings from the not contracted out employment
|NICs type||NICs due||Table letter|
Recording the NICs due on Real Time Information
Payroll software will record the category letter where NICs are paid on earnings between the LEL and the UEL. Figures will be recorded under contribution Table letter D. The entries on RTI for month 1 of 2015 to 2016 will be as follows.
|79A||Gross earnings for NICs year to date||£6,200|
|79B||Gross earnings for NICs pay period||£6,200|
|82||Earnings at the LEL year to date||£486|
|82A||Earnings at LEL to PT year to date||£186|
|83||Earnings PT to UAP year to date||£2,665|
|84||Earnings UAP to UEL year to date||£187|
|86A||Employer NICs year to date||£608.98|
|86Aa||Employer NICs this pay period||£608.98|
|86B||Employee NICs year to date||£355.85|
|86Ba||Employee NICs this period||£355.85|
|49||Aggregated earnings indicator||Yes|