National Insurance Contributions (NICs)

National Insurance Contributions (NICs)

 2016/17

 Class 1

 Employee

 (Primary)

 Employer

 (Secondary)

 Payable on weekly earning of
 
 
 Below £112 (lower earnings limit)
 Nil
 –
 £112 to £115 (primary threshold)
 0%*
 – 
 Below £156 (seconday threshould)
 –
 Nil
 Above £156
 –
 13.8%
 £155.01 – £827 (upper earnings limit)
 12%**
 – 
 £156.01 – £827 (upper secondary threshould (UST) for under 21s)
 12%
 0%
 £156.01 – £827 (apprentice upper secondary threshould (AUST) for under 21s)
 12%
 0%
 Above £827
 2%**
 –

*No NICs are actually payable but a notional Class 1 NIC is deemed to have been paid; this protects contributory benefit entitlement.
**Over state pension age, the employee contribution is generally nil.

Employment allowance                                            up to £3,000 (per year)

Class 1A          On relevant benefits                 13.8%

Class 2             Self employed                            £2.80 per week 

                           Small profits threshould           £5.965 per annum

Class 3                Voluntary                                  £14.10 per week

Class 3A          Voluntary contributions may be available to 5 April 2017 in order to obtain extra additional State Pension (maximum £25 a week) – variable contribution rates according to age.

Class 4           Self employed on annual profits

                         £8,060 – £43,000                    9%*

                         Excess over £43,000              2%*

* Exemption applies if state pension age was reached by 6 April 2016.

Changes to the Employment Allowance
From April 2016 the annual Employment Allowance for employer NICs increases from £2,000 to £3,000. However, companies where the director is the sole employee will no longer be able to claim this allowance.

Future changes
It was announced that from April 2018, Class 2 NICs will be abolished, and a reform of Class 4 NICs will be undertaken.

Termination payments
From April 2018, employer NICs will be due on termination payments above £30,000 that are already subject to income tax.

The first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs.