| All rates in this article are for 2009/10. | | | | types of national insurance that are payable... |
| NIC for Employees | | | | 1. Class 2 contributions, amount to £2.40 |
| For employees Class1 National Insurance (NI) | | | | per week and are due if you earn more than |
| primary contributions are deducted from their | | | | £5,075 per year. These can be paid by |
| salary each month as part of the PAYE system. | | | | monthly Direct Debit or quarterly by bill. They |
| They are paid on earnings between £110 | | | | provide only very basic cover for state benefits. |
| and £844 per week at 11% and then an | | | | You get the basic retirement pension but not the |
| extra 1% on any earnings above this. | | | | earnings related pension. You may also claim |
| The rate of NIC paid by employees is affected | | | | incapacity benefits but not industrial injuries |
| by whether you are contracted out of SERPS or | | | | benefit. |
| S2P as it is now called (the State Second Pension | | | | 2. Class 4 contributions on the taxable profit you |
| Scheme) in which case a reduced rate is payable. | | | | make between £5,715 and £43,875 |
| If the employee has contracted out of SERPS | | | | per annum. The rate is 8% of that profit and 1% |
| and into a salary-related scheme, then at the | | | | above this. |
| basic level the NIC rates are reduced by 1.6% for | | | | The good news is that this is less than you would |
| the employee and 3.7% for the employer. For | | | | pay as an employee where the rate is usually |
| money-purchase schemes, the employee's | | | | 11% at these levels and 1% after that. |
| reduction is still 1.6%, but the employer's reduction | | | | Voluntary National Insurance |
| is 1.4% and an additional age-related payment is | | | | Class 3 National Insurance is a voluntary |
| made to the scheme by the NICO. | | | | contribution at the flat-rate contributions of |
| However, if an employee contracts out of SERPS | | | | £12.05 per week and can be paid by people |
| into a personal pension, the full NI contribution has | | | | to keep up their national insurance record for the |
| to be paid, but a rebate is then paid by the NICO | | | | retirement pension and some other benefits, |
| to the pension provider. | | | | when they haven't paid enough of any of the |
| NICs for Employers | | | | other forms of contribution. |
| Class 1 secondary contributions are paid by the | | | | Class 2 contributions can also be paid voluntarily to |
| employer at the rate of 12.8% on all the | | | | protect entitlement to UK benefits while |
| employee's income above £110 per week | | | | temporarily posted abroad. |
| (2009/10). The contributions must be paid over to | | | | Summary |
| HMRC together with the primary contributions | | | | * Class 1 primary contributions are paid by |
| deducted from the employees' salaries, each by | | | | employees; |
| the 19th of each month or by 22nd if paying | | | | * Class 1 secondary contributions are paid by |
| electronically. Employers with small payrolls can | | | | employers |
| elect to pay quarterly. | | | | * Class 1A is paid by employers; |
| Class 1A contributions are paid by the employer | | | | * Class 2 is paid by the self-employed, and |
| on most forms of benefits provided to the | | | | voluntarily by employees posted overseas; |
| employee, at the rate of 12.8% on the value of | | | | * Class 3 is a voluntary contribution to make up |
| the benefit provided. Class 1A contributions are | | | | any deficits; |
| paid once a year by 6 July after the tax year | | | | * Class 4 is paid by the self-employed if they |
| end. | | | | earn enough, but does not provide any |
| Self Employment NIC | | | | entitlement to state benefits. |
| When you become self-employed there are two | | | | |