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HMRC internal manual

National Insurance Manual

NIM12021 - Class 1: Calculating Class 1 NICs for Directors: Annual earnings periods for Directors: Introduction

Regulation 8 SSCR 2001

A director within regulation 8 SSCR 2001 has an annual earnings period (AEP). Do nottreat directors as normal weekly or monthly paid employees unless they are not within theregulation, see NIM12003. The only other individuals who haveAEPs are those whose service companies or partnerships are within the intermediaries(‘IR35’) legislation, see ESM3000 onwards.

Whether an annual or pro-rata earnings period applies, you must always use it for eachpayment of earnings. The intervals between payments are irrelevant.

Primary and secondary NICs are payable if the director’s cumulative earnings for theyear exceed the annual (or pro-rata if the director is appointed during the year) primarythresholds (PT) and secondary thresholds (ST). If the total earnings reach or exceed theLEL, NICs are payable on all earnings including those below the thresholds.

If the earnings exceed the annual or pro-rata upper earnings limit (UEL):

  • Primary NICs are payable on earnings up to and including the UEL, and
  • Secondary NICs are payable on all earnings

The annual LEL and UEL are calculated by multiplying the weekly LEL and UEL by 52.

The secondary contributor can pay “on account” of any earnings relatedcontributions using the same earnings periods as for other employees. However there mustbe a calculation at the end of the year using an annual earnings period and thecontributions adjusted accordingly (NIM12026).