Introduction to Income Tax and NICs National Insurance contributions
2023-24 %
Rates
Employer
On earnings up to LEL
Nil
On earnings between LEL and ST
0
On earnings above ST (except below)
13.8
On earnings of under 21s between ST and UST
0
On earnings of apprentices under 25 between ST and AUST
0
On veterans’ earnings (year 1) between ST and VUST
0
On Freeport workers’ earnings (years 1 to 3) between ST and FUST
0
On earnings over UST, AUST, VUST and FUST
13.8
4.8
Calculation methods
The legislation prescribes two methods for calculating Class 1 NICs. These are outlined below.
Note that it is not permitted to switch between calculation methods in order to minimise liability. Employers can change method from one tax year to the next. Normally, HMRC will permit one change during a tax year for a specific reason, such as moving from a manual payroll system to a computerised system.
4.8.1 The exact percentage method
The exact percentage method requires the NICs to be calculated using:
• The exact amount of the earnings (including pence)
• The percentage rate(s) for the relevant category letter.
To calculate NICs using the exact percentage method, follow these steps:
• Work out how much of the NICable pay falls into the intervals between each limit and threshold (under the PT, PT to UEL, and so on)
• Apply the relevant percentage to that amount, then add the results together
• Figures must not be rounded off during the calculation of NICs below or above UEL for primary NICs and below or above FUST and UST for secondary NICs; four decimal places will suffice.
page 32 of 60
Made with FlippingBook - Online magazine maker