Introduction to Income Tax and NICs National Insurance contributions
Complete exemptions
Payroll practitioners are likely to encounter the following examples of complete exemption from NICs.
Employees under age 16 No liability whatsoever arises on earnings paid before someone’s sixteenth birthday. Note again that it is the date of payment that determines liability and not the period over which the payment may have been earned. Occupational pension payments There is no liability on payments of occupational pension, regardless of the age of the recipient. Such payments do not count as earnings for National Insurance purposes so no NICs are due. Employees seconded overseas There is also an exemption applicable to employees seconded to work overseas. This a very complicated area, and the actual rules that will determine complete or partial exemption take into account such issues as the countries or region that the employee comes from or goes to and the period of the secondment.
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Partial exemptions
There are several types of partial exemption that Payroll will encounter. Exemptions for employer or employee NICs will apply in the following circumstances.
Employees under 21 years old From April 2015, employers pay reduced NICs on the earnings of under 21 years old up to the new Upper Secondary Threshold (UST)
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• Employees who are apprentices and under 25 years old From April 2016, employers pay reduced NICs on the earnings of employees aged under 25 years old on approved apprenticeships up to the new Apprentice Upper Secondary Threshold (AUST)
• Veterans in their first 12 months of civilian service
From April 2021, employers are entitled to NICs relief on the earnings of veteran employees within the first 12 months of civilian employment up to the Upper Secondary Threshold (UST). The relief is available from April 2021, however between April 2021 and March 2022 employers needed to calculate and pay the secondary NICs on these earnings as normal and then claim it back retrospectively from April 2022 onwards. From April 2022, the relief is applied in real time through PAYE.
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