Introduction to Income Tax and NICs National Insurance contributions
4.6
NICs category (table) letters
NICs are calculated by applying specific percentage rates that vary according to:
• Earnings between various limits and thresholds (see below)
The employee’s circumstances These are organised in categories that are identified using category letters.
•
• Whether the NICs are paid by the employee or the employer.
In order to calculate the NICs for each pay period, therefore, the employer must determine the NICs category letter that applies to the employee for that pay period.
Often, an employee’s category letter will not change during the tax year or for many years. Category letters are also known as table letters.
The employee’s NICs category letter is based on the employee’s circumstances on the date that earnings are paid, not in the period over which they are earned.
Where an employee changes NICs category letter, for example, on reaching State Pension Age, the revised letter category will therefore apply to the whole of any earnings that are paid after the change. The earnings may relate to a period before the change, but that does not matter. What matters is the date of payment. This applies whatever the reason for the change, including a married woman paying reduced rate contributions who divorces, or an employee becoming 21 years old.
4.6.1 Factors determining the NICs category letter
Exemptions from NICs liability may be partial (employer-only pays) or complete (neither employer nor employee pays).
Type of employee
There are some types of employee that special NICs category letters apply to. These types of employee are members of the armed forces and mariners.
Gender
There are two ways in which the employee’s gender can affect the NICs category letter. These relate to the right to pay reduced rate NICs and to the end of the liability to pay NICs when the person reaches the State Pension Age (SPA) because SPA differs according to whether the employee is male or female. Both of these are explained below.
Note that if an employee changes gender, then the NICs category letter may also change.
page 23 of 60
Made with FlippingBook - Online magazine maker