National Insurance

andrewtdk

National insurance has always got me a bit confused and i dont feel i know much about it so am hoping someone can help me.

I understand the lower earnings limit is when you need to have a payroll scheme set up and i believe you still qualify for state pension etc if your earning are over this?

The primary threshold is where you start to pay NI and the upper earnings limit is when you go down to currntly 1% NI but what is the upper accruals point and the secondary threshold for?

Cheers

Andrew

Raging Pineapples

I've never had to use the upper accruals point, but from a quick Google search it seems like it has something to do with pensions and contracted-out workers. Take a look at this:

http://www.hmrc.gov.uk/legislation/nics-bill-faqs.htm#6

As regards the rest:

CLASS I NATIONAL INSURANCE:

Employees who earn above the LEL (£102, 2011-12) have 'deemed' national insurance contributions. They don't pay contributions, but they are still entitled to certain benefits as if they had made contributions. It's to help low earners.

The next point is the Primary Threshold. Above this point, the employee will pay Employees contributions at the Employees Primary Class I Rate (12%, 2011-12). So an employee's usual contributions to Class I national insurance are called the 'Primary' contributions.

The next point is the Secondary Threshold. Above this point, the employER will pay Employers Secondary Class I Rate (13.8%, 2011-12). These are called the 'Secondary' Class I contributions.

The next point is the Upper Earnings Limit. On earnings above this level, the employee pays Primary contributions at a reduced rate (2%, 2011-12). The employer continues to pay Secondary contributions at the same rate (13.8%, 2011-12).

CLASS I A:

This is National Insurance Contributions paid on certain chargeable benefits.


CLASS II:

These are weekly charges (£2.50, 2011-12) charged to the Self Employed. They are optional for individuals with an operating profit lower than £5,315 (2011-12), who can choose to pay anyway (sometimes a good idea for the sake of certain benefits which they might otherwise lose!) or otherwise request a Certificate of Small Earnings Exemption each year.

CLASS III:

Voluntary contributions, which can be paid to fill in gaps in one's National Insurance Record.

CLASS IV:

An additional rate of National Insurance on the Self Employed with profits over the Class 4 Lower Profits Limit (£7,225, 2011-12). The standard rate is 9% (2011-12). Profits above the Class 4 Upper Profits Limit (£42,475, 2011-12) are charged at the lower rate of 2% (2011-12).


There are other details, like employees whose pensions are contracted out, and 'deferred' employments, but these are areas I know almost and absolutely nothing about respectively, lol.

Hope this helps - any mistakes, all, please do correct.

andrewtdk

Thanks for the reply.

I guess i'd never heard of the secondary threshold because it was always the same as the primary threshold as it appears to be the first time that the point which employees and employers pay NI is different

I dont think ill worry about the upper accruals point, i cant see it coming up much for me

Cheers