Chapter 4 - Class 1 NIC

Question 1

Class 1

Answer 1

Class 1 NIC is paid by employees and employers on earnings from employment. Class 1 Primary is paid by employees, Class 1 Secondary is paid by employers. Accounted for under PAYE system and paid over to HMRC on the 22nd of each month if made electronically, 19th if not.

Question 2

Earnings

Answer 2

Earnings include:

• cash payments (other than genuine business expense reimbursements)
• payments that can be surrendered for cash
• readily convertible assets (stocks and shares)
• settlement of employee’s personal liability
• vouchers (except childcare)
• mileage payments that exceed 45p a mile

Question 3

Class 1 Primary Rates

Answer 3

Paid by employees on earnings in an earnings period. Weekly rates:
- 0% on first £162 a week (primary threshold)
- 12% between £162 and £892 (UEL)
- 2% above UEL of £892.
Monthly rates:
- 0% on first £702
- 12% between £702 and £3,863
- 2% above UEL of £3,863
Class 1 Primary starts at 16 up to pension age

Question 4

Calculation

Answer 4

NIC is calculated for each earning period. A monthly earner would therefore have 12 periods. 12 separate calcs are made and added together.

Question 5

Class 1 Secondary Rates

Answer 5

Paid by employers on the same earnings the employee pays on. The rate is 13.8%, paid on everything above £162p/m or £702p/m with no UEL. Start from 16. No age limit.

Question 6

Upper Secondary Threshold

Answer 6

For all employees under 21 and apprentices under 25, the rate of employee contribs is 0% on earnings between the £162/702 threshold ans the upper secondary threshold which is the same as the UEL.

Question 7

Employment Allowance

Answer 7

An employer can deduct up to £3,000 from their Class 1 Secondary liability for the tax year. It can’t be carried forward