PART 3: NATIONAL INSURANCE
director (net salary/fees/bonuses/dividends etc) are accounted for. If at any time the account becomes overdrawn, i.e. the director owes money to the business, NICs become due on the overdrawn amount. Where the director has more than one job with the same business, or with businesses working in association, all earnings must be aggregated before calculating liability, and the exact percentage method of calculation applied. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS For further information see HMRC’s Helpbook CA44 at https://www.gov.uk/government/ publications/ca44-national-insurance-for-company-directors . CONTRACTING-OUT Until 5th April 2016 where an employee was a contributor to an occupational or private pension scheme, which provides minimum pension benefits, or a GMP (Guaranteed Minimum Pension) at least as good as that which is provided by the state second pension (S2P) the scheme members were permitted to be contracted-out of S2P. In acknowledgement of the provision of an occupational pension providing additional benefits and not reliant on S2P the employer/ employee pay lower NICs contributions - see NICs rebate above. Contracted-out National Insurance contributions were payable at a reduced level on assessable earnings above the LEL up to the UAP (prior to 6th April 2009 to the UEL). When S2P was abolished on 6th April 2016, the last contracting-out ceased to exist. Age-related Rebates Over the period 6 April 1993 to 5 April 1997 an extra 1% rebate, in addition to the normal rebate, applied to those aged over 30. This was replaced by age-related rebates that apply to all defined contribution pension schemes and Appropriate Personal Pension schemes. The rebates were paid into an individual’s pension account. Rebates for tax years 2002/2003 onwards were split into three categories of earnings (lower, middle and higher) in accordance with the actual bands for the State Second Pension. The table below shows the rates related to the higher earnings band. It had to be multiplied by 2 in the lower, and by 0.5 for the middle band. Age-related rebates were abolished from 6th April 2012. Contracting-out Rebate The rate at which the contributions are reduced was known as the contracting-out rebate. On the advice of the Government Actuary, the Secretary of State for Social Security set the value of the rebate usually, but not always, at five-year intervals. Contracting-out rebates were abolished for COMP schemes from 6th April 2012 and reduced by 0.5% for COSR schemes from 6th April 2012 - 5th April 2016. These were then abolished for COSR schemes from 6th April 2016.
Contracting-out Rebate from 1981/1982 No printing, copying or reproduction permitted. Employee Employer Years Employee
Years
Employer
COMPS COSRS
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