Introduction to Income Tax and NICs Introduction
3.4
Abbreviations ......................................................................................... 18 National Insurance contributions................................................ 19
4.1
What are National Insurance contributions? ........................................ 19
4.2
National Insurance number ................................................................... 19
4.2.1
NI Recording System ............................................................................... 19
4.2.2
NINO format ............................................................................................. 20
4.2.3
Sources of NINOs .................................................................................... 20
4.3
Classes of NI contributions ................................................................... 21
4.4
Definition of ‘employee’ ......................................................................... 22
4.5
‘Earnings’ ................................................................................................ 22
4.6
NICs category (table) letters .................................................................. 23
4.6.1
Factors determining the NICs category letter............................................ 23
4.6.2
Category letters normally encountered ..................................................... 27
4.7
Limits, thresholds and rates .................................................................. 27
4.7.1
Lower Earnings Limit (LEL) ...................................................................... 28
4.7.2
Primary Threshold (PT) and Director’s Primary Threshold (DPT) .............. 28
4.7.3
Secondary Threshold (ST) ....................................................................... 29
4.7.4
Upper Secondary Threshold (UST) .......................................................... 29
4.7.5
Apprentice Upper Secondary Threshold (AUST) ......................................29
4.7.6
Veterans Upper Secondary Threshold (VUST) ......................................... 29
4.7.7
Freeport Upper Secondary Threshold (FUST) .......................................... 29
4.7.8
Upper Earnings Limit (UEL)...................................................................... 30
4.7.9
Limits, thresholds and rates...................................................................... 30
4.8
Calculation methods .............................................................................. 32
4.8.1
The exact percentage method .................................................................. 32
4.8.2
The table method ..................................................................................... 33
4.9
Abbreviations ......................................................................................... 34
4.10
Key forms ............................................................................................... 35 Pay As You Earn and income tax ................................................ 36
5.1
What is PAYE? ....................................................................................... 36
5.1.1
Operating PAYE ....................................................................................... 36
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