NIM10068 - Aggregation of earnings: calculation and recording: NICs due at main rate: different earnings periods
All examples on this page use the 2020 to 2021 rates and earnings bands. National Insurance contributions (NICs) are worked out using the exact percentage method.
When calculating aggregated NICs, as there is no contracted-out element, NICs are worked out on the total earnings using the shortest earnings period.
Employee’s NICs are worked out at:
- the main percentage rate on any earnings above the Primary Threshold (PT) up to and including the Upper Earnings Limit (UEL)
- the additional percentage on earnings which exceed the UEL
Employer’s contributions are worked out at the main secondary percentage rate on earnings which exceed the Secondary Threshold (ST).
Example
An employee earns £2,500 per month from one job, and £400 per week from another. The earnings period is weekly as this is the shortest earnings period.
In 12 of the weeks, he receives both a weekly pay and a monthly pay (£2,900 assessed on a weekly earnings period) and in the other 40 weeks he receives a weekly pay only (£400 assessed on a weekly earnings period).
In week 1, he receives £400 weekly pay.
| NICs type | NICs due | Table letter |
|---|---|---|
| Employee’s NICs | £26.04 | A |
| Employer’s NICs | £31.88 | A |
Recording the NICs due on Real Time Information (RTI)
Payroll software only records category letters where NICs is paid on earnings between the LEL and the UEL. The figures will be recorded under contribution Table letter A. The entries on RTI for month 1 of 2020 to 2021 will be as follows.
Week 1
| Data item | Description | |
|---|---|---|
| 79 | NI category | A |
| 79A | Gross earnings for NICs year to date | £400 |
| 79B | Gross earnings for NICs pay period | £400 |
| 82 | Earnings at the LEL year to date | £120 |
| 82A | Earnings at LEL to PT year to date | £63 |
| 169 | Earnings PT to UEL year to date | £217 |
| 86A | Employer NICs year to date | £31.88 |
| 86Aa | Employer NICs this pay period | £31.88 |
| 86B | Employee NICs year to date | £26.04 |
| 86Ba | Employee NICs this period | £26.04 |
| 49 | Aggregated earnings indicator | Yes |
In week 5, he receives his £400 weekly pay and his £2,500 monthly pay.
| NICs type | NICs due | Table letter |
|---|---|---|
| Employee’s NICs | £132.24 | A |
| Employer’s NICs | £509.12 | A |
Recording the NICs due on Real Time Information
Payroll software only records category letters where NICs is paid on earnings between the LEL and the UEL. The figures will be recorded under contribution Table letter A. The entries on RTI for week 5 of 2020 to 2021 will be as follows (he has already received 4 weekly payments of £400).
| Data item | Description | |
|---|---|---|
| 79 | NI category | A |
| 79A | Gross earnings for NICs year to date | £4,500 |
| 79B | Gross earnings for NICs pay period | £2,900 |
| 82 | Earnings at the LEL year to date | £600 |
| 82A | Earnings at LEL to PT year to date | £315 |
| 169 | Earnings PT to UEL year to date | £1,647 |
| 86A | Employer NICs year to date | £636.64 |
| 86Aa | Employer NICs this pay period | £509.12 |
| 86B | Employee NICs year to date | £236.40 |
| 86Ba | Employee NICs this period | £132.24 |
| 49 | Aggregated earnings indicator | Yes |