Introduction to Income Tax and NICs National Insurance contributions
The final figure is rounded by looking at the third decimal place: 5 or less is rounded down, 6 or more is rounded up. For example, £87.4558 rounds to 87.45 but £87.4568 rounds to 87.46.
Employee NICs and employer NICs are calculated separately.
The percentage rates are shown in the table above and are available at Rates and thresholds for employers 2023 to 2024 - GOV.UK (www.gov.uk)as well as being in booklets that HMRC publishes for the table method (see below).
The exact percentage method must always be used where the earnings period is not a multiple of a week or month.
The exact percentage method is more time consuming to do than the table method. Almost all payroll software uses this method. The CIPP uses the exact percentage method in its examples, exercises and exams (unless otherwise stated).
4.8.2 The table method
The table method involves looking up the NICable earnings in the table for the relevant category letter. HMRC issues tables for all the category letters (other than X, which is not a genuine category letter). These tables include: • CA38 – Weekly and monthly tables for category letters A, F, H, J, L, M, V and Z
• CA41 – Weekly and monthly tables for category letters B, C, I and S.
Other publications include CA42 for foreign-going mariners and deep-sea fishermen and CA39 containing the now-redundant contracted-out category letters.
Earnings amounts in the weekly tables progress by increments of £1. Ignoring any pence, look up the employee’s earnings in whole pounds. The table shows the NICs payable by the employee, by the employer and the total NICs due from both employee and employer. Earnings amounts in the monthly tables progress by increments of £4. Always go to the lower figure; for example, for gross pay of £1,431, use the NICs shown against £1,429 in the tables. The NICs figures in the tables are actually calculated at the mid-point between the increments. So, for the example above, NICs will actually have been calculated on £1,431, that being the mid-point between £1,429 and £1,433. As a result, the NICs payable figure will usually be slightly advantageous or disadvantageous, compared to a calculation based on the exact earnings.
The main tables can only be used for earnings up to and including the UEL. Where earnings exceed the UEL, an extra calculation is needed to work out the NICs due
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