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HMRC internal manual

PAYE Manual

PAYE operation: PAYE direct payment: taxpayer responsible for own NIC

Class 1 National Insurance consists of two parts

  • Primary - the employee’s share
  • Secondary - the employer’s share

An employer is entitled to deduct Class 1 National Insurance contributions (NIC) from an employee and is responsible for paying both parts to HMRC.

Most people have a secondary contributor (usually the employer) who is responsible for the deduction of primary NICs from their wages. It is therefore the employer, or an agent acting on behalf of the employer, who registers for a PAYE scheme and pays both PAYE Income Tax and National Insurance (NI) to HMRC under the one PAYE reference.

If there is no legal responsibility for the employer to deduct secondary NI, it is the responsibility of the employee to register for a PAYE scheme.

There are slightly different procedures where PAYE Direct Payment taxpayers are responsible for their own NICs. As NI can sometimes be payable when there is no PAYE Income Tax obligation there are different types of payment schemes available

  • Direct Collection (employee only NIC) - set up by an employee where direct payment of only primary Class 1 NI is due. Further guidance can be found at PAYE20090 
  • Direct Payment (tax and NIC) - set up by an employee where direct payment of only primary NI and PAYE Income Tax is due. Further guidance can be found at PAYE20100 
  • NI scheme (NI only) - set up by the employer when direct payment of both primary and secondary NI only is due. Further guidance can be found at PAYE20120 

The taxpayer should be able to tell you if they are responsible for his or her own NICs.

Advice on all scheme types is available in section ‘Set up employer record’ at PAYE20080 onwards.