When is employers nic due

If a third party provides a cash award, the third party is responsible for deducting PAYE from the award and should seek advice on what to do from us. The value of that award must also be reported to you to enable you to account for the National Insurance contributions due. If a third party provides the award they can only account for the tax by entering into a taxed award scheme.

Promoters who sell incentive schemes or operate them for others cannot account for tax on awards except those made for their own employees. Read paragraph 5. You, the employer, are liable for any Class 1 National Insurance contributions even if a third party provides the awards to your employees. But, where the award attracts a Class 1A National Insurance liability, the third party is liable unless you arrange or facilitate the provision of the award.

They can account for the Class 1A National Insurance contributions by entering into a tax agreement scheme. For more advice, read Part 6 — third party benefits of the CWG5 guide. Payments made by way of non-cash vouchers, with certain exemptions, attract liability for National Insurance contributions. That is, you must add the cost to you in providing those non-cash vouchers to any other earnings paid in the earnings period and work out National Insurance contributions on the total.

You do not have to calculate or report any National Insurance contributions for the pay period until the last payment is made in the same period. Pay the National Insurance contributions due on the revised gross pay figure. Most non-cash vouchers provided by third parties, where the direct employer does not arrange or facilitate the provision, are excluded from Class 1 National Insurance contributions.

However, vouchers provided by third parties in connection with the provision of readily convertible assets read section 5 always attract Class 1 liability and the direct employer is responsible for the National Insurance contributions.

This is the case regardless of whether the tax is accounted for through a taxed award scheme. Follow the instructions for how to calculate, record, and report the National Insurance contributions due on the amount of tax you paid. Where the tax is in relation to benefits in kind or non-cash vouchers, which are subject to Class 1A National Insurance contributions, the third party will be responsible for paying Class 1A National Insurance contributions on the amount of tax paid if they have arranged or facilitated the provision of the benefit or non-cash voucher.

The third party will also have to account for that payment through a taxed award scheme. You do not have to calculate or report any National Insurance contributions for the pay period until the last payment to that employee is made in the same period. For more information about liability for National Insurance contributions on items included in PAYE settlement agreements, read section 5. If an award is made for the benefit of more than one employee, read paragraph 2.

Cash vouchers are vouchers that can be exchanged for an amount of money which is not much less than the expense the employer or third party incurs in providing them. The amount to include in gross pay is the surrender value of the voucher. The cost in providing a non-cash voucher is not normally the face value unless, exceptionally, the cost in providing it and its face value are the same. As such, a non-cash voucher is valued for National Insurance contributions purposes in the same way as for tax.

If you provide a voucher which attracts a National Insurance contributions liability for the benefit of more than one employee, the value of the voucher must be apportioned between those employees. They provide the voucher to 3 employees with the intention that employee:.

The following types of non-cash voucher, provided to an employee, are exempt from National Insurance contributions liability:. From 6 April changes were made to the rules about providing vouchers to employees for childcare. So long as the qualifying conditions are satisfied, National Insurance contributions are only payable on the cost of the childcare which exceeds the exempt amount.

Providers of awards who wish to enter into a taxed award scheme should ask for an information pack from:. Email: incentive. Employers who use the TAS arrangements for incentive awards, and third parties who provide such awards, can report liability for Class 1A National Insurance contributions and account for the National Insurance contributions through taxed award scheme arrangements.

This section describes the special rules for working out National Insurance contributions and deducting PAYE on certain types of holiday payments. The following information relates to schemes for holiday pay in the construction industry or similar schemes when a group of employers contribute to a central, independently managed holiday pay fund such as electrical contracting, heating, ventilation and domestic engineering industries.

Employment law instructs employers in the obligation of providing paid holidays to their employees, so each employer must calculate and pay their employee the payment due to them when taking holiday during the period of that employment.

How to work out National Insurance contributions on holiday pay is described at paragraph 2. For example, Christmas or their annual holiday, for both PAYE and National Insurance contributions purposes include the amount set aside in gross pay at the time it is set aside. For holiday pay from a holiday credit scheme when money is set aside each payday to be paid in a lump sum when your employees take their holidays, for both PAYE and National Insurance contributions purposes, include these amounts in gross pay:.

In both cases, the figures must be included in their payroll record and sent to HMRC on your FPS when you report your payroll information. For example, if an employee is on holiday in weeks 16 and 17 and the wages for those weeks are paid in week 15, together with the pay for week 15, PAYE tax should be calculated on the holiday pay using week You must report the payment on the FPS in the week you make the payment.

Where PAYE is being worked out on a week 1 or month 1 basis, split the pay equally between the full weeks of the holiday and work out and record PAYE on each amount separately for each week. You should report the payment on an FPS in the week that you make the payment.

The total amount of PAYE due for these weeks is the amount you should deduct from the total holiday pay. If your employee will be leaving or retiring straight after their holiday, then work out the PAYE tax due on their holiday pay using the free pay for the week in which you pay it to them.

Split the sum up and work out National Insurance contributions on the payment for each week separately. Work out the National Insurance contributions on the whole sum based on the number of weeks it represents. Round up parts of a week. Work out National Insurance contributions on a 3 week basis by dividing the total earnings on which National Insurance contributions are payable by 3, looking up this figure in the appropriate weekly table and multiplying the National Insurance contributions shown in the table by 3.

If an employee stays at work instead of taking their holiday and you have already worked out National Insurance contributions on the holiday pay, the additional National Insurance contributions due on their wages for working is dependent on how the National Insurance contributions on the holiday pay were calculated. If method B was used do not add the holiday pay to the pay due for working but work out and record National Insurance contributions separately on the pay due for working in the normal way.

If weekly paid employees do not take their holiday until sometime after receiving the pay for it. If payments are due to be paid during a holiday period, the National Insurance contributions due on the payment are dependent on how National Insurance contributions were worked out on the holiday pay for the week in which payment is due to be made.

For example, an employee is due to be paid for overtime worked but because of the payroll arrangements the overtime does not become payable until the employee is on holiday. If method A was used to work out National Insurance contributions on the holiday pay, regardless of the week in which the payment is actually made:. However, if the payment is actually made in a different tax year from the one in which it was due to be made, work out National Insurance contributions separately on the payment based on the contribution rates and limits current at the time of payment.

If method B was used to work out National Insurance contributions on the holiday pay, and if payment is:. These examples are based on to contribution rates and limits for an employee paying National Insurance contributions under category letter A. National Insurance contributions are worked out using the exact percentage method. On the payday of 20 August, as the overtime payment has already been accounted for, National Insurance contributions are only due on the wages for that week as follows.

Add the overtime payment to the wages and work out National Insurance contributions on the total. National Insurance contributions due are therefore:.

Wage incentives paid to employers as part of the Youth Contract or Work Choice are subject to normal rules of taxation. A tip or gratuity is an uncalled for and spontaneous payment offered by a customer either in cash, as part of a cheque payment, or as a specific gratuity on a credit or debit card payment.

Where that is not the case, the payment is a compulsory service charge. PAYE is not due if cash tips are received directly from customers by your employees and are retained by them, and the monies never pass through your hands.

Such tips are, however, taxable directly on the employee who should tell us the amounts they have received.

Your employees should declare the money to HMRC who will usually adjust their tax code to collect any tax due. If, as an employer, you operate a scheme that pays your employees a share of tips or gratuities including cash tips received by employees and handed to you by the employees for sharing or service charges whether voluntary or mandatory you must include the amount paid to each employee in their gross pay and deduct PAYE accordingly.

A tronc is a separate organised pay arrangement used to distribute tips, gratuities and service charges. The troncmaster is responsible for operating PAYE on all payments made from the tronc, including any share of cash tips.

The troncmaster, or someone on their behalf, will need to operate a computerised payroll system and report payroll information to HMRC when or before the payments are made to employees. If you impose a mandatory service charge and the money is paid out to your employees, National Insurance contributions are due on the payments no matter what arrangements are in place to share out the money.

See Booklet E Tips, gratuities service charges and troncs , which explains when National Insurance contributions will be due. Where National Insurance contributions are due, the responsibility for working out and recording the National Insurance contributions will always be yours, as the employer.

If a troncmaster makes a payment to your employees on which National Insurance contributions are due, make sure you:. The troncmaster should record the amounts on which National Insurance contributions are due separately from any tips or gratuities on which National Insurance contributions are not payable. It may also be advisable if you take responsibility yourself for paying all earnings to any employee whose basic pay is not enough for full deductions of PAYE and National Insurance contributions to be made.

Further guidance can be found at running payroll. Where you decide an employee is involved in a trade dispute but they disagree, advise the employee to contact Jobcentre Plus. During a trade dispute the procedures that apply in relation to the payments you make to the accounts office are as follows:. If you have chosen to continue as normal to work out the tax refunds due to your employees you should observe the following procedures when making your monthly or quarterly payments to the accounts office:.

You should take the following action in such circumstances:. Guidance for reporting PAYE in real time is also available at payroll. Ordinarily, the earnings period for working out National Insurance contributions is the regular interval between which payments of earnings are made. The following paragraphs describe how to decide what the earnings period is in different circumstances.

The rules described in those paragraphs ordinarily do not apply to directors. Read CA National Insurance for company directors for details on the earnings period to use for directors. If you pay your employees at regular intervals, for example, weekly or monthly, the earnings period for working out National Insurance contributions is that regular interval.

If a payment is not made at regular intervals, there may be a regular pattern covering the period for which each payment is made. In such cases, that regular pattern should be used as the earnings period. If the interval between payments to employees is not regular, and cannot be treated as being regular, the earnings period for working out National Insurance contributions is the period which the payment covers, or one week, whichever is longer.

If either period is less than one week, the earnings period is one week. The earnings period for a payment made before the employment begins or after it ends is 1 week. As a general rule, if an employee is paid more than one set of regular payments, all payments must be added together and National Insurance contributions worked out using the shorter of the regular intervals between payments.

If an employee receives basic pay on a weekly basis and commission on a monthly basis, National Insurance contributions are worked out on the total pay based on a weekly earnings period. When you first pay an employee, you must work out National Insurance contributions based on what will be the normal earnings period for the employment using the contribution rates and limits current at the actual time of payment.

If the interval between an employee starting work and the first payday is less than the normal earnings period, still work out National Insurance contributions using the normal earnings period. A new employee starts work on 6 October and is due to be paid monthly on the last day of each month. The earnings period is monthly and the first payday is 31 October.

Work out National Insurance contributions using a monthly earnings period. If the interval between an employee starting work and the first payday spans 2 or more earnings periods, and each period is in the same tax year, work out National Insurance contributions on the amounts due for each of those earnings periods separately using the normal earnings period.

A new employee starts work on 9 June and is due to be paid monthly on the last day of each month. The earnings period is monthly and the first payday is 31 July mistimed payments.

If the interval between an employee starting work and the first payday spans 2 or more earnings periods, and the relevant earnings periods are in different tax years, work out National Insurance contributions on the earnings due for each period separately using the normal earnings period.

Use the contribution rates and limits current at the time the earnings are actually paid. A new employee starts work on 10 March and is due to be paid monthly on the last day of each month. The earnings period is monthly and the first payday is 30 April. If the actual date of payment and the usual payday are in the same tax year, treat the early or late payment as if it had been made at its usual time.

In different tax years, work out National Insurance contributions on the early or late payment separately from any other payments made in that tax year, using the contribution rates and limits appropriate to the year in which the payment is actually made. If the payment is due to be made on a non-banking day, read paragraph 1. In both the same and different tax years, look at each payment individually and decide which of the rules apply to that payment.

An employee is paid monthly on submission of a timesheet. The employee submits timesheets for February , March and April during May Work out National Insurance contributions on the payments due for February and March separately using the to contribution rates and limits. Record the National Insurance contributions separately in tax month 2. Work out National Insurance contributions on the payments for April and May separately and record the National Insurance contributions in tax months 1 and 2 respectively.

The methods described for calculation of mistimed payments can only be used when nothing was paid on the usual paydays. This section describes the rules which govern the payment of National Insurance contributions if an employee has more than one job.

If an employee has another job or jobs with a different employer or employers, work out National Insurance contributions in the normal way on the earnings you pay the employee.

Ignore the payments made to the employee in the other jobs. You may be asked to show why it has not been practicable to add together the earnings from each job. For advice on the type of information we use if we review your decision, read paragraph 3.

You can find more information in the National Insurance Manual. Read aggregation of earnings at NIM onwards. An employee may work for 2 or more employers in separate jobs but only get one payment of earnings.

If an employee has 2 or more jobs with you at the same time, the general rule is that you must add all the earnings together and work out National Insurance contributions on the total. For example, this might be if you operate a computerised payroll system which is unable to perform the separate calculation and you would then have to do it manually. In such cases, you may be required to show why it has not been reasonably practicable to add the earnings together from each job. We rely upon the ordinary dictionary meaning and any relevant court decisions.

The onus is on you as the employer to show that aggregation is not reasonably practicable. For more information, read what to do if your employee has more than 1 job. Class 1 secondary contributions continue to be payable at the standard rate on all earnings above this threshold.

Secondary Class 1 contributions continues to be payable on all earnings above the apprentice UST. The current way in which National Insurance contributions is assessed remains unchanged. National Insurance contributions must be worked out on the total earnings using the exact percentage method rather than the contribution tables.

This portion of earnings can only be disregarded once. The earnings period to be used is the shortest. The examples in this chapter explain what you need to do. The examples use the rates and limits applicable to the to tax year. For more information on using the exact percentage method, read how to manually check your payroll calculations. If you feel that this section applies to you, and you need more information or help in this area, you can find our address and phone number in help and guidance or read what to do if your employee has more than 1 job.

This example tells you how to work out National Insurance contributions when earnings from more than one job are added together and the jobs have different earnings periods. This is how the National Insurance contributions are worked out.

For the 12 weeks where Jason receives both his weekly and monthly salary:. Total employer National Insurance contributions: 0.

If an employee has one payroll identity add together all the payments made in one earnings period under one category and report National Insurance contributions data on the total amount. Employee has one payroll ID and is paid on the same day for both jobs using one payroll identity — to rates. The payments are made under one payroll ID.

You must add together all the payments made in one earnings period and calculate National Insurance contributions due on the total amount. If an employee receives payments under 2 different payroll identities, you must use the following procedure:. This reference will be the one under which HMRC will expect payment for both the employer National Insurance contributions and employee National Insurance contributions to be made.

Employee has 2 jobs with same employer, paid using different PAYE references. Dev is aged 23 and has 2 jobs with the county council — one as an apprentice in the planning department and one with the education department. Each department has a separate payroll, and so different PAYE references. These are the aggregated earnings and National Insurance contributions must be calculated using the guidance.

The council decides to show the aggregated earnings on the job with the planning department. The records are updated to show:. You do not need to report year to date National Insurance contributions data on this employment, since this will be reported on the monthly FPS. Employees with more than one employment, who anticipate earning in excess of the UEL in one, or in a number of employments, can apply to the National Insurance contributions and Employer Office for permission to defer some of their contributions liability.

An application for deferment is required each year. Employees with more than one job who want to know about deferment of Class 1 National Insurance contributions read guidance notes for form CA72A or phone Deferment Services on Telephone: It may be decided that one or more of your employees can become retrospective members of your occupational pension scheme.

This includes employees who have been reinstated retrospectively. You and the employees will be entitled to a refund of the difference between the not contracted-out National Insurance contributions paid and the contracted-out rate National Insurance contributions due since the retrospective membership date.

Refunds will only be applicable to tax years before , read paragraph 3. Some married women and widows have the right to pay reduced rate National Insurance contributions. A certificate of election gives you the authority to deduct reduced rate National Insurance contributions and you must keep the certificate until the woman:. If an employee gives you a certificate of election which is not valid, return it them. If an employee has more than one job, they must get a separate certificate to give each employer.

A woman who wishes to give up their right to pay reduced rate National Insurance contributions must:. As such, a married woman or widow will not lose their right to pay reduced rate National Insurance contributions. You may consider it worthwhile to have arrangements in place:. Complete the parts of the certificate which apply to you before you return it to your employee.

When you have returned a certificate, if the woman still works for you, deduct standard rate National Insurance contributions unless they have:. If you cannot return a certificate of election to an employee who has left, send it with a note of explanation to PT Operations North East England at the address shown in paragraph 3.

You must reassess and adjust any National Insurance contributions already deducted if your employee:. If an overpayment of National Insurance contributions occurs in the current year as a result of your receiving a valid certificate of election part of the way through the year:. To get a refund of an overpayment in a tax year which has ended when you have reported information using forms P35 or P14, the employee must write to HMRC , quoting their National Insurance number.

More information about the right to pay reduced rate National Insurance contributions can be obtained by:. This can be a birth certificate, passport or certificate of exception, issued by Department for Work and Pensions. There will be very rare instances where an employee is reluctant to provide the employer with a birth certificate as it may contain sensitive information that they do not wish to disclose.

If this happens they should write to HMRC advising the reason why they cannot use the birth certificate. HMRC will investigate these and provide a letter confirming they have reached state pension age where this is the case. Your employee may give you a certificate of age exception issued by Department for Work and Pensions instead of showing you their passport or birth certificate. You should keep the certificate for as long as the employee works for you.

HMRC no longer issue certificates of age exception, however in exceptional circumstances your employee can contact HMRC to obtain a letter confirming they have reached State Pension age. Always return a certificate of age exception to your employee when their employment ends. If an overpayment has occurred in a previous tax year when you have reported information using forms P35 or P14 for a previous real time information year, to get a refund the employee must write to HMRC.

If an underpayment occurred for a previous tax year, contact the PT Operations North East England at the address shown at paragraph 3. The Employment Allowance is available for most businesses, charities and Community Amateur Sports Clubs to be offset against their employer Class 1 secondary National Insurance contributions. Businesses, charities, certain individuals who employ care and support workers and Community Amateur Sports Clubs may claim the Employment Allowance if the earnings they pay give rise to a secondary Class 1 National Insurance contributions liability.

Read Employment Allowance to check if you qualify. In the case of a business, this could be a company, a partnership or a self-employed individual, if they have employees whose earnings give rise to a secondary Class 1 liability.

What is National Insurance? The quarter dates are: 5th July — amount due by 22nd July 5th October — amount due by 22nd October 5th January — amount due by 22nd January 5th April — amount due by 22nd April.

What penalties may I incur if I file late? You may be charged a penalty if: your Full Payment Submission was late, or you did not send in the expected number of Full Payment Submissions, or you failed to send an Employer Payment Summary when no employees were paid. However, there will be no charge for your first failure in a tax year to send a report on time. Find out more. What penalties may I incur if I pay late? You may be charged a penalty if your payment to HMRC is late.

What penalties may I incur if my return is wrong? To simplify reporting, employers can use scale rates or flat rates to reimburse employees, instead of the actual costs incurred. Scale rates include:. You can apply for a bespoke scale rate approval notice on the GOV. UK website. Expenses and benefits reimbursed using approved scale rates do not need to be reported to HMRC.

Approval notices must be renewed every five years. Once you have agreed a settlement agreement, you can make a single Class 1B employer NIC payment by 22 October following the tax year it applies to, based on the total value of all the benefits covered by the agreement.

To find out more, see our FAQs. In , the Office of Tax Simplification produced two reports proposing relatively modest NICs reforms to bring them closer to income tax; but the government rejected the main suggestions for involving too much upheaval and U-turned on its initial acceptance of two others, ultimately making only very minor technical adjustments.

The apprenticeship levy — a new tax introduced in — is not part of NICs, but it acts very much like additional employer NICs. The levy is 0.

In other words, it is a 0. This is in effect a 0. Contributions made by the self-employed comprising both Class 2 and Class 4 contributions are a relatively small source of revenue, accounting for less than 2. That reflects a combination of the much smaller numbers of self-employed people, their lower average earnings and the lower NICs charged on their earnings.

Note: The chart excludes Northern Ireland. A key question is the economic incidence The economic incidence of a tax describes which people are ultimately made worse off by the tax and can be different from those who are legally liable to pay the tax.

Read more of NICs: who ultimately bears the burden, in the sense of having their living standards reduced by the tax.

The economic incidence The economic incidence of a tax describes which people are ultimately made worse off by the tax and can be different from those who are legally liable to pay the tax. Read more of a tax must always ultimately be on real people. In practice, it will almost always be a combination of these. Simple economic theory suggests that the incidence The economic incidence of a tax describes which people are ultimately made worse off by the tax and can be different from those who are legally liable to pay the tax.

It is likely that the long-run incidence The economic incidence of a tax describes which people are ultimately made worse off by the tax and can be different from those who are legally liable to pay the tax. Read more of both employer and employee NICs is predominantly on employees, but the empirical evidence is not clear-cut.

Employers care about the total cost of employing someone including tax ; employees care about their take-home after-tax income. So if employee NICs are increased and employer NICs reduced, or vice versa, the laws of supply and demand for labour should ensure that gross earnings adjust to keep labour cost and net earnings unchanged. Such an adjustment may take time, however, and evidence from past NICs reforms in the UK suggests it does not happen within a year or so of any reform.

Even if the incidence The economic incidence of a tax describes which people are ultimately made worse off by the tax and can be different from those who are legally liable to pay the tax. Read more of employee and employer NICs is the same, that does not necessarily imply that the burden of employer NICs is fully passed on to the worker. Conventional wisdom among economists is that the incidence The economic incidence of a tax describes which people are ultimately made worse off by the tax and can be different from those who are legally liable to pay the tax.

Read more of employer and employee NICs will be the same in the long run, and is likely to be predominantly on employees. However, the empirical evidence on how far — and how quickly — earnings adjust so that employer and employee taxes really do have the same effects in practice, and on how far their burden falls on employees versus others, is mixed and hotly debated.

The chart below shows the distributional impact of NICs under the simple assumption that all NICs — employee, employer and self-employed — are fully incident on the worker whose earnings are taxed. It shows the impact on overall household incomes, taking into account, for example: the extent to which high earners tend to live together; that the impact of NICs on many low-income households is cushioned as their reduced net earnings result in higher entitlements to means-tested benefits; and that if as we assume employers pay lower wages as a result of having to pay employer NICs, those lower wages reduce the amount of income tax employees must pay.

The chart shows that higher-income households pay much more, not only in cash terms but as a percentage of their income — except that NICs reduce the incomes of the highest-income tenth of households by a smaller proportion than the 8 th or 9 th decile groups, because of the fall in marginal NICs rates above the UEL and UPL.

Note: The chart assumes all NICs are incident on the worker whose earnings are taxed. Households are divided into 10 equal-sized groups based on their net income adjusted for household size using the Modified OECD equivalence scale. Income tax is the single most important source of revenue for the UK Treasury.

Chart Table. Notes to chart and table Rates in table apply above the stated thresholds. What incomes are subject to NICs? In measuring earnings for NICs purposes: Work-related expenses can be deducted; the rules on what can be deducted are much stricter for employees than for the self-employed.

The treatment of benefits in kind payment to employees in the form of goods or services rather than money, such as company cars or health insurance varies. Some are subject to NICs in full; others generally those that cannot be sold or traded are subject to employer but not employee NICs. Note Rates apply above the stated thresholds.