NIM01207 - Class 1 structural overview from April 2009: earnings limits, thresholds & NIC rebate: from 6 April 2009
Regulation 10 of the Social Security Contributions Regulations 2001 (SSCR 2001)
Earnings limits and Thresholds
From 6 April 2009 there is still a
- Lower Earnings Limit (LEL), see NIM01005,
- Secondary Threshold (ST), see NIM01008 and
- Primary Threshold (PT), see NIM01008.
No contributions are paid on earnings between the LEL and the thresholds, with NICs becoming payable only when earnings exceed the thresholds. However, primary contributions, see NIM01001, are treated as having been paid on earnings at the LEL, see NIM01005, up to and including the Primary Threshold (see also NIM01007 covering ‘Notional Primary’).
There is still an Upper Earnings Limit (UEL). This is the maximum amount of earnings on which an earner pays NICs at the Class 1 main primary percentage.
NICs reliefs for Employers
From 2015 a number of upper thresholds have been introduced that provide employers with NICs reliefs in certain circumstances and provide a 0% rate of NICs between the ST and an upper secondary threshold as set out in the table below.
| Date from | Description | Abbreviation | See NIM |
|---|---|---|---|
| 6 April 2015 | Upper Secondary Threshold for under 21’s | UST | NIM01295 |
| 6 April 2016 | Upper Secondary Threshold for Apprentices under 25 | AUST | NIM01305 |
| 6 April 2021 | Upper Secondary Threshold for Armed Forces Veterans | VUST | NIM01400 |
| 6 April 2022 | Upper Secondary Threshold for freeport employees | FUST | NIM01500 |
For guidance on the structure of Class 1 NICs up to 6 April 2003, see NIM01000.
For guidance on the structure of Class 1 NICs from 6 April 2003 up to 6 April 2009, see NIM01100.
For further guidance on calculating and recording NICs, including NIC rates, see NIM11000 onwards.
If aggregation of earnings is involved see NIM01004, see also NIM10000 onwards.
NIC rebate
From 6 April 2009 to 5 April 2016 there was an Upper Accrual Point (UAP), see NIM01205. This was the maximum amount of earnings on which an earner who is contracted out of the state pension scheme can receive a NICs rebate.
Where employers operate contracted-out pension schemes they and their employees who are members of the schemes receive a reduction in their NICs. The reduction, for both employees and employers, is in effect realised via a reduction in the NICs percentage rate applied to earnings between the LEL and the UAP. The percentage rate differs for employees and employers. The difference between the full contracted-out rate and these reduced rates is known as the contracted-out rebate’.
From 6 April 2012 the NIC rebate for employees was reduced from 1.6% to 1.4% and for employers from 3.7% to 3.4%
From 6 April 2016 Contracting-out was abolished and this page no longer applies to tax years from this date, see NIM01209.
For further information about