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Employer’s NICs – The Basics

A basic introduction to Employer’s National Insurance Contributions………


What are Employer’s NICs?

  • An employer has to make National Insurance Contributions based on the total salary they provide to their employees.
  • This is not a tax deducted from an employee’s gross salary, it is an expense to the employer.
  • A Limited Company can be a registered employer, as can a Sole Trader.


Does it apply to me?

  • If you are paying yourself a salary (including bonuses and commission) of more than £663 per month (for the year April 2014 – April 2015), then yes.
  • However you may qualify for the £2,000 Employer’s NICs Allowance from April 2014.
  • Dividends are not included as salary when calculating Employer’s NICs due.
  • Note if you are a Sole Trader who employs other people then you should be registered as an employer (unless the people working for you are casual, self employed workers).
  • Sole Traders who only pay themselves, however, cannot register as employers. Their salary is taken as Drawings and different classes of National Insurance will apply to profits.


How is it calculated?

  • When an employee’s gross salary is over £663 per month (in 2014/15) Employer’s NICs will be charged on the additional value.
  • For example, Joe is paying himself £8,400 per year (before tax deductions) which is the equivalent of £700 per month.
  • So a proportion of his salary will be subject to Employer NICs: £700 – £663 (currently) = £37 per month.
  • I will continue this example below to find the actual Employer NICs due.


What is the current rate of Employer’s NICs?

  • The current rate of Employer’s NICs is 13.8%. This is set to stay the same in the next financial year.
  • To continue the example of Joe’s salary above, we calculated that £37 per month of his salary is subject to Employer’s NICs.
  • So £37 x 13.8% = £5.11 of Employer’s NICs are due on one month of Joe’s salary.
  • If you are thinking that it seems like a lot, you’re right! It is quite a hefty charge. And there is no lower rate for higher earnings: it stays at 13.8% even when other types of Income Tax or National Insurance go down.
  • All the more reason to take advantage of the new Employer’s NIC Allowance if you qualify!


How are Employer’s NICs Reported to HMRC?

  • Employer NICs are reported via the Real Time Information (RTI) payroll reporting system which came into effect in April 2013.
  • The RTI system allows employers to report every month for all their listed employees whether they have received a salary or not in that month.
  • Reporting for RTI can be made using the HMRC PAYE Tools (free software) or via payroll software.


How are Employer’s NICs paid to HMRC?

  • Employer’s NICs are paid to HMRC either online via the Billpay system or by cheque using payslips which you will be sent when you register as an employer.
  • It is normal to pay Employer’s NICs monthly.
  • However, if you are likely to owe total NICs and PAYE taxes of under £1,500 per month you can elect to pay HMRC quarterly.
  • The payments must reach HMRC by the 22nd of the month following the end of the tax month or quarter to which it relates.


Do I need an accountant or posh software to work this out myself?

  • No, you can do this yourself if you wish.
  • If you have less than 10 employees you can use the HMRC PAYE tools software which is a free download from the HMRC website.
  • More information on HMRC PAYE tools and downloads are available here
  • However, if you would rather have somebody calculate payroll for you then feel free to contact me regarding the payroll services I offer as part of accountancy packages.

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