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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 reach or exceed LEL but do not reach UEL

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.


P. Brown earns £300 per week from his not contracted-out job, and £250 per week from his contracted-out job. Total earnings are £550 per week and the earnings period is weekly.

Employee’s NICs are worked out at the:

  • main percentage rate on not contracted earnings above the PT
  • contracted-out primary percentage rate on earnings on contracted-out earnings

Employer’s NICs are worked out at the:

  • main secondary percentage on earnings above the ST as far as the earnings from the not contracted-out employment
  • contracted-out secondary percentage rate on earnings on contracted-out earnings
NICs type NICs due Table letter
Employee’s NICs £17.40 A
Employee’s NICs £26.50 D
Employer’s NICs £19.87 A
Employer’s NICs £26.00 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 letters A and D. The entries on RTI for week 1 of 2015 to 2016 will be as follows.

Week 1
Data item Description    
79 NI category A D
79A Gross earnings for NICs year to date £300 £250
79B Gross earnings for NICs pay period £300 £250
82 Earnings at the LEL year to date £112 £0
82A Earnings at LEL to PT year to date £43 £0
83 Earnings PT to UAP year to date £145 £250
84 Earnings UAP to UEL year to date £0 £0
86A Employer NICs year to date £19.87 £26.00
86Aa Employer NICs this pay period £19.87 £26.00
86B Employee NICs year to date £17.48 £26.50
86Ba Employee NICs this period £17.48 £26.50
49 Aggregated earnings indicator Yes Yes