How to calculate employers National Insurance for different class?

How to calculate National Insurance contributions?

National Insurance contributions are paid by only those employees or employers who have NI number and are above 16 years of age. Different rates are paid which is based on their classes (Class 1, Class 2, Class 3 or Class 4). There are multiple brackets/classes through which one can calculate how much NI is paid. Or you can simply use our calculator below and find out how much NI is paid. You can take help from the instructions given below the calculator.

This calculator is only for reference purpose and provides an estimate. But if you wish to get an accurate result,

please consult with an expert accountant

How to use the calculator

1. Input your age and select YES if you have NI number. Only people with NI number pay national insurance.

2. Select your national insurance class – Class 1, Class 2, Class 3 or Class 4.

3. Select your payment terms (monthly or weekly) and put that amount under Income tab.

4. Select the year for which NIC has to be calculated and hit the calculate button to get your answer.

National Insurance (NI) needs to be paid by both employed and self-employed workers. Employers are obliged to pay National Insurance (NI) contribution on the salary as well as benefits given to the employees. Benefits that are liable to contributions may include provision of medical insurance and company cars. An employer is responsible for deducting income tax as well as NI contributions from the salary paid to employees. Apart from an employee’s own contributions, an employer pays their share of the NI contribution (this is an additional cost above the gross salary paid to the employee). In all, there are 6 classes of National Insurance contributions (NICs):

Class 1 – paid by employees through the employer as well as by the employers themselves

Class 2 – paid by self-employed individuals

Class 3 – voluntary contributions by individuals

Class 4 – paid by self-employed persons as a percentage of profit

The other two which apply to employers are Class 1A and Class 1B

Class 1: These payments are collected by employers and paid through the pay-as-you-earn (PAYE) system. An employer contribution is computed as a percentage of employee earnings over a certain amount and is applied to the benefits provided to an employee. There are a enormous number of Class 1 categories applying to employees in various circumstances. However, a special calculation applies to directors.

• Class 1A payments are paid by employers and others on benefits provided to employees.
• Class 1B contributions are paid by those employers who have settled on a PAYE Settlement Agreement with HM Revenue and Customs (HMRC). They are computed on the collective value of the items covered by the agreement and the tax payable by the employer under the agreement. These contributions are paid at the same rate as Class 1A but do not offer any benefit entitlement to individual employees.

Class 1A and Class 1B rates

Employers pay Class 1A and 1B NI once a year on expenses and benefits they give to their employees. The rate for the tax year 2017-18 and 2018-19 is 13.8%

Tax thresholds and rates

The amount of income tax an employer deducts from an employee’s salary depends on their tax code and the amount of taxable income above their Personal allowance. For the tax year 2017-18 and 2018-19, the following information is available:

PAYE tax rates, thresholds and codes	Tax year 2017-18	Tax year 2018-19
Employee personal allowance	£222 a week / £959 a month / £11,500 a year	£227 a week / £984 a month / £11,850 a year
Basic tax rate	20% on annual earnings greater than the PAYE tax threshold and upto £33,500	20% on annual earnings greater than the PAYE tax threshold and upto £34,500
Higher tax rate	40% on annual earnings from £33,501-£150,000	40% on annual earnings from £34501-£150,000
Additional tax rate	45% on annual earnings greater than £150,000	45% on annual earnings greater than £150,000

Employee National Insurance rates

The following table shows the amount deducted by employers deduct from employees’ pay for tax year 2017-18 and 2018-19

Category letter	2017-18			2018-19
	£113-£157 per week	£157-£866 per week	Over £866 per week	£116-£162 per week	£162-£892 per week	Over £892 per week
A	0%	12%	2%	0%	12%	2%
B	0%	5.85%	2%	0%	5.85%	2%
C	NA	NA	NA	NA	NA	NA
H	0%	12%	2%	0%	12%	2%
J	0%	2%	2%	0%	2%	2%
M	0%	12%	2%	0%	12%	2%
Z	0%	2%	2%	0%	2%	2%

Let’s understand this through an example. If an employee is in category A and earns £1,000 in a week, the computation for the year 2018-19 will be:

• No amount payable for the initial £162
• Between £162.01 and £892 @12% = [£730 * 12% =£87.6]
• On the remaining earnings above £892 @2% = [£ 108 * 2% = £2.16]
  Hence, an employee’s National Insurance payment, for the week, will be £8.76

Employer National Insurance rates

The following table shows the amount an employer pays towards employees’ National Insurance for tax year 2017-18 and 2018-19

Category letter	2017-18			2018-19
	£113-£157 per week	£157-£866 per week	Over £866 per week	£116-£162 per week	£162-£892 per week	Over £892 per week
A	0%	13.8%	13.8%	0%	13.8%	13.8%
B	0%	13.8%	13.8%	0%	13.8%	13.8%
C	0%	13.8%	13.8%	0%	13.8%	13.8%
H	0%	0.0%	0.0%	0%	0.0%	0.0%
J	0%	13.8%	13.8%	0%	13.8%	13.8%
M	0%	0.0%	13.8%	0%	0.0%	13.8%
Z	0%	0.0%	13.8%	0%	0.0%	13.8%

Category letters

Employers use NI category letter to work out how much they both need to contribute. Most employees have category letter A. Employees can find the category letter on their pay-slip

Category letter	Employee group
A	All employees except those in groups B, C, J, H, M and Z
B	Widows and married women. They are entitled to pay reduced NI
C	Employees above the State Pension age
H	Apprentice under 25
J	Employees who can defer NI as they are already paying it in another job
M	Employees under 21
Z	Employees under 21 who can defer NI because they’re already paying it in another job

Employers NIC calculation and filing

Within each class there are many categories of contributions and the rates for each are published in an electronic table form by HMRC. An employer is responsible for allocating the correct table for each employee depending on a lot of criteria. The rate payable by employee and employer is determined by the suitable table. The major responsibility of an employer is to:

• Deduct employee Class 1 contributions through the payroll
• Pay employer Class 1A contributions following the end of the tax year on benefits provided to employees and
• if a pay-as-you-earn settlement agreement has been signed, to pay employer Class 1B contributions after the end of the tax year

Most filing with the HMRC can be done via the online PAYE system. In addition, all employers are required to file an employer annual return online. Online forms must be filed:

• when an employee joins or leaves employment
• when a new employee joins but does not have a P45 form from a previous employer
• when the employer starts paying a new pension or annuity

Benefits of working with DNS Accountants

We are one of the leaders in taxation and accounting in the United Kingdom. Being a trustworthy brand since years, DNS Accountants has helped many clients with Council Tax queries and Council Tax payments. The DNS team encompasses erudite taxation professionals and ACA’s or Chartered Accountants (CAs) and they have exceptional knowledge in the accounting and taxation domain. If residents have missed any of their payments, please get in touch with us at www.dnsassociates.co.uk as soon as possible. Remember, if we do not know that a client is having problems paying, we cannot help them. With primary focus on delivering outstanding customer service, we believe in offering unmatched client service. DNS Accountants offers services at a nominal rate and helps clients with accounting services and tax-planning.

DNS works with clients to enable them grow the business and maximise profits. Our services comprise of auto enrolment, bookkeeping and accounting services, payroll services, self assessment, individual and business taxation, value added tax (VAT) planning, property tax advisory and consulting services for construction industry. We aims to deliver high-quality customer service and help clients focus on the core business activities. Our additional services include:

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Also Read : Reduced Rate National Insurance Contributions for Married Women

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About the author



Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.