NIM01271 - Class 1 structural overview - post April 2009: structural changes: the Class 1 and 2 annual maximum: examples: general

NIM01272 to NIM01279A provide examples of calculating the Class 1 and 2 annual maximum for various earners with differing employment patterns. The examples are for illustrative purposes only as each contributor with more than one employment will have an individual maximum based on the number of employments held and the level of earnings received in their Class 1 employments. These examples can also be used for the 2003 to 2004 tax year to 2009 to 2010 tax year by applying the relevant rates and thresholds that apply to those tax years.

The following notes should be read in conjunction with each example:

Example 1: Two Class 1 employments - earnings of £97,200

NIM01272 provides a straightforward example of a monthly paid employee with two separate employments who is employed throughout the 2021 to 2022 tax year. The total earnings are £97,200. The employee is subject to a maximum that equals 12% of earnings equivalent to 53 x the UEL less the PT, plus 2% on all remaining earnings which, when paid were above the monthly Primary Threshold. The employee has earnings which are consistently above the monthly UEL.

Example 2: Three Class 1 employments - earnings of £97,200 (static earnings)

NIM01273 provides the same earnings as in NIM01272 but spread evenly over three employments. Again the employee is employed throughout the whole of the 2021 to 2022 tax year and is paid monthly in each employment. The employee is subject to a maximum that equals 12% of earnings equivalent to 53 x the UEL less the PT, plus 2% on all remaining earnings which, when paid were above the monthly Primary Threshold. The employee has no earnings above the monthly UEL.

Example 3: Three Class 1 employments - earnings of £97,200 (fluctuating earnings)

NIM01274 provides the same earnings as in NIM01272 spread over three employments but which fluctuate. The employee also commences one employment during the 2021 to 2022 tax year. The employee is subject to a maximum that requires 12% on earnings equivalent to 53 x the UEL less the PT, plus 2% on all remaining earnings which, when paid were above the monthly Primary Threshold. In some earnings periods the employee earns below the PT and in others above the UEL.

Example 4: Two Class 1 employments and also self-employment - Class 1 earnings above the UEL. Employee not required to pay Class 2

NIM01275 provides a straightforward example of a monthly paid employee with two employed earner’s employment who is also self-employed. The employee earns £72,000 evenly throughout the 2021 to 2022 tax year. The employee is subject to a maximum that requires 12% on earnings equivalent to 53 x the UEL less the PT, plus 2% on all remaining earnings which, when paid were above the monthly Primary Threshold. The employee reaches his maximum by the payment of Class 1 contributions and no Class 2 contributions are due

Example 5: One Class 1 employment and also self-employment - Class 1 earnings above the UEL. Employee required to pay Class 2

NIM01276 provides an example for the 2021 to 2022 tax year of a monthly paid employee with one Class 1 employment who is also self-employed and who earns the same as the employee in NIM01275. The employee is subject to a maximum that requires 12% on earnings equivalent to 53 x the UEL - less the PT, plus 2% on all remaining earnings which, when paid were above the monthly Primary Threshold. The employee does not exceed his maximum by the payment of Class 1 NICs and is therefore required to pay Class 2 NICs.

Example 6: Four Class 1 employments - maximum not reached

NIM01277 provides an example for the 2021 to 2022 tax year of a maximum calculation involving a person who has earnings from four employments. The employee earns £180 a week in each employment. The employee is subject to a maximum that requires 12% on earnings equivalent to 53 x the UEL only.

Example 7: Director with three directorships

NIM01278 provides an example of a maximum calculation for a director who has 3 directorships. In each he receives no regular payments but in each he receives an annual bonus of £200,000. The director is subject to a maximum that requires 12% on earnings equivalent to 53 x the UEL less the PT, plus 2% on all remaining earnings which, when paid were above the Primary Threshold.

Example 8: 2022 to 2023 tax year example

NIM01279 provides an example of a maximum calculation for the 2022 to 2023 tax year for an employee who has two separate employments earning £50,000 in each employment. Their total earnings for the 2022 to 2023 tax year are £100,000. They are paid monthly in each job and they receive the same amount of earnings in each earnings period.

Example 9: 2023 to 2024 tax year example

NIM01279A provides an example of a maximum calculation for the 2023 to 2024 tax year for an employee who has two separate employments earning £50,000 in each employment. Their total earnings for the 2023 to 2024 tax year are £100,000. They are paid monthly in each job and they receive the same amount of earnings in each earnings period.