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HMRC internal manual

National Insurance Manual

Aggregation of earnings: examples: contracted-out and not contracted-out: Appropriate Personal Pension (APP) in place: not contracted-out earnings do not reach LEL but total earnings do: tax years 2015 to 2016 and earlier

All examples on this page use the 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.

Order of priority

When calculating NICs where an APP is held, priority is given to the not contracted-out earnings from the employment in which the APP is held. NICs are worked out on the total earnings using the shortest earnings period of the employment(s) in which an APP is held.

Next in the order of priority is contracted out earnings and finally, not contracted out earnings. The earnings period remains the shortest of the not contracted out employments in which an APP is held.


A. Chapman earns £100 per week from his not contracted-out job, and £400 per week from his contracted-out job. Total earnings are £500 per week and the earnings period is weekly.

Employee’s NICs are worked out at the main 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).

Employer’s contributions 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).

NICs type NICs due Table letter
Employee’s NICs £35.97 D
Employer’s NICs £34.28 D

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. The end of year totals will be recorded under contribution Table letter D. The entries on RTI for week 1 of 2015 to 2016 will be as follows.

Week 1
Data item Description  
79 NI category D
79A Gross earnings for NICs year to date £500
79B Gross earnings for NICs pay period £500
82 Earnings at the LEL year to date £112
82A Earnings at LEL to PT year to date £43
83 Earnings PT to UAP year to date £345
84 Earnings UAP to UEL year to date £0
86A Employer NICs year to date £34.28
86Aa Employer NICs this pay period £34.28
86B Employee NICs year to date £35.97
86Ba Employee NICs this period £35.97
49 Aggregated earnings indicator Yes