NIM01221 - Class 1 structural overview from 6 April 2009: assessing primary Class 1 NICs from 6 April 2009: examples: general
It is important to note that, whilst prior to the introduction of a primary liability on earnings above the Upper Earnings Limit (UEL), the same level of annual earnings paid in differing patterns could result in differing liabilities, the new primary liability on earnings above the UEL does not require earnings to reach 52 (or 53) times the UEL before it becomes due. In the following examples, one employee has earnings which consistently exceed the monthly UEL, the other exceeds the monthly UEL only once.
The examples provided at NIM01222 and NIM01223 illustrate how the calculation of Class 1 NICs operates for two employed earners whose annual earnings are the same but whose pattern of earnings differs. Both earners have total annual earnings of £60,000 but the pattern of payments dictates a differing Class 1 NICs liability. Both employees are paid monthly.
Employee 1, Mr Braddock, who is paid £5,000 per month and has an annual salary of £60,000, has a primary liability of £5059.92, see NIM01222.
Employee 2, Mr Murdock, who is paid £3000 per month but receives an annual bonus of £24,000 in March 2013 and has an annual salary of £60,000, has a primary liability of £3,419.66 - see NIM01223.
The examples above use the rates, limits and thresholds applicable to the 2020 to 2021 tax year. The calculations use the exact percentage method.
The examples provided at NIM01224 and NIM01225 are the same as above but in these examples both earners are contracted out of the state second pension. Both have total annual earnings of £48,000 but the pattern of payments dictates a differing Class 1 NICs liability. Both earners are paid monthly. These examples use the rates, limits and thresholds applicable to the 2012 to 2013 tax year. The calculations use the exact percentage method.