As an employer, UK National Insurance is a tax levied on the amount you pay your workers, and National Insurance Contributions (NICs) are deposited into a state pot, which is used to support various state benefits and public sector activities.
As an employer, UK National Insurance is a tax levied on the amount you pay your workers, and National Insurance Contributions (NICs) are deposited into a state pot, which is used to support various state benefits and public sector activities.
While NICs are also paid by workers and self-employed persons, this advice concentrates on how much National Insurance you must pay as an employer on behalf of your employees.
How to Calculate National Insurance for Your Employees
You will have a National Insurance category letter for each of your full-time or part-time workers, which you should use when submitting payslips and processing payroll. This assists you in determining how much you must donate for each employee. Many workers fall within group A. However, based on their specific position, your workers may be assigned to one of the following categories:
Married working women and widows in Category B are eligible for reduced National Insurance payments.
Employees in Category C who are above the current State Pension age.
Employers in Category J are permitted to delay NICs because they pay them via another work, such as self-employment income.
Apprentices under the age of 25 in Category H.
Employees under the age of 21 are classified as Category M.
Employees under the age of 21 who may postpone NICs because they are already paying them via another employment.
Your responsibilities as an employer in terms of National Insurance
You have a legal obligation as an employer to deduct main Class 1 payments from workers’ earnings on their behalf – these are also known as employees’ contributions.
Employers must also make supplementary Class 1 payments on their workers’ earnings.
In addition, you must make Class 1A contributions on the majority of taxable benefits and costs. The employer is the only one who pays for these.
If you have a PAYE Settlement Agreement (‘PSA’) in place for any of your workers, you must pay employer-only Class 1B payments instead of the Class 1 or Class 1A contributions that would otherwise be payable.
When you make your monthly Pay As You Earn (‘PAYE’) payments, you must pay both main and secondary contributions to HMRC in full and on time (or quarter as appropriate).
You must maintain track of each employee’s contributions and submit year-end returns for each of them.
Class 1A contributions for benefits and costs must be reported on Form P11D(b) by the 6th of July after the end of the tax year.
Class 1A payments must then be paid to HMRC by the 22nd of July after the end of the tax year if made electronically; otherwise, the deadline is the 19th of July.
Class 1B contributions must be computed on products covered by any PSAs to which your workers may be liable.
If paid electronically, Class 1B payments must be made to HMRC by the 22nd of October after the end of the tax year; otherwise, the deadline is the 19th of October.
You must provide each employee a P60 detailing the National Insurance payments they owe by the 31st May after the end of the tax year.
What is the National Insurance deductible?
Employers and workers must pay Class 1 NICs at six different rates. Employers are required to pay NICs on earnings over the secondary level, with the exception of workers under the age of 21 and apprentices under the age of 25.
| Class 1 NIC thresholds | Bands for 2021/22 tax year |
|---|---|
| Lower earnings limit | £120 per week £520 per month £6,240 per year |
| Primary threshold | £184 per week £797 per month £9,568 per year |
| Secondary threshold | £170 per week £737 per month £8,840 per year |
| Upper secondary threshold (under 21s)
(Employers of employees who are under 21 pay zero rate up to this point) |
£967 per week £4,189 per month £50,270 per year |
| Apprentice upper secondary threshold (under 25s)
(Employers of certain apprentices who are under 25 pay zero rate up to this point) |
£967 per week £4,189 per month £50,270 per year |
| Upper earnings limit | £967 per week £4,189 per month £50,270 per year |
How much NI does an employer pay?
How much an employer pays in Class 1 NICs depends on their employees’ salary and their NI category letter:
| Category | £520-£737 per month income | £737.01-£4,189 per month income | £4,189.01+ per month income |
|---|---|---|---|
| A | 0% | 13.8% | 13.8% |
| B | 0% | 13.8% | 13.8% |
| C | 0% | 13.8% | 13.8% |
| H | 0% | 0% | 13.8% |
| J | 0% | 13.8% | 13.8% |
| M | 0% | 0% | 13.8% |
| Z | 0% | 0% | 13.8% |
Employers should be aware of the employment allowance, which allows certain company owners to reduce the amount of employer NICs they must pay – up to a maximum allowance of £4,000 per year. This discount is only available to small enterprises with total NIC costs of less than £100,000.
Employees under the age of 21 and apprentices under the age of 25 are free from employer Class 1 NICs unless they earn more than £4,189.01 per month.