Chapter 9 - Class 1 NIC Flashcards
Class 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.
Earnings
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
Class 1 Primary Rates
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
Calculation
NIC is calculated for each earning period. A monthly earner would therefore have 12 periods. 12 separate calcs are made and added together.
Class 1 Secondary Rates
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.
Upper Secondary Threshold
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.
Employment Allowance
An employer can deduct up to £3,000 from their Class 1 Secondary liability for the tax year. It can’t be carried forward
Married Women’s Reduced Rate
If a woman was married at 6 April 1977, they may have claimed reduced Class 1. She will have a certificate. If she does, she pays Class 1 primary at 5.85% between primary threshold and UEL. 2% above UEL. Secondary contributions remain 13.8%
