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HMRC internal manual

National Insurance Manual

Aggregation of earnings: examples: contracted-out and not contracted-out: no Appropriate Personal Pension (APP) held: contracted-out earnings reach or exceed LEL but do not reach 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).


A. Smith is paid monthly and receives £1,000 per month from his contracted-out job and £300 per month from his not contracted-out job. Total earnings are £1,300 per month and the earnings period is monthly.

Employee’s NICs are worked out at the:

  • main contracted-out percentage rate on any earnings above the PT up to and including the UAP (less the employee’s contracted-out rebate on earnings between LEL and PT) until contracted-out earnings run out
  • main primary percentage rate on earnings up the UEL on not contracted-out earnings

Employer’s NICs are worked out at the:

  • main contracted-out secondary percentage on earnings above the Secondary Threshold as far as the earnings from the contracted-out employment go (less the employer’s contracted-out rebate on earnings between LEL and ST)
  • main secondary percentage on earnings from the not contracted out employment
NICs type NICs due Table letter
Employee’s NICs £37.37 D
Employee’s NICs £36.00 A
Employer’s NICs £27.38 D
Employer’s NICs £41.40 A

Recording the NICs due on Real Time Information

Payroll software only records category letters where NICs is paid on earnings between the LEL and the UEL. Figures will be recorded under contribution Table letters A and D. The entries on RTI for month 1 of 2015 to 2016 will be as follows.

Month 1
Data item Description    
79 NI category D A
79A Gross earnings for NICs year to date £1,000 £300
79B Gross earnings for NICs pay period £1,000 £300
82 Earnings at the LEL year to date £486 £0
82A Earnings at LEL to PT year to date £186 £0
83 Earnings PT to UAP year to date £328 £300
84 Earnings UAP to UEL year to date £0 £0
86A Employer NICs year to date £27.38 £41.40
86Aa Employer NICs this pay period £27.38 £41.40
86B Employee NICs year to date £37.37 £36.00
86Ba Employee NICs this period £37.37 £36.00
49 Aggregated earnings indicator Yes Yes