For 2001/2002 tax year onwards there is a Lower Earnings Limit
(‘LEL’ - see
NIM01005) and a Primary and a Secondary
Thresholds (see
NIM01008) . No contributions are paid on
earnings between the LEL and the thresholds, with NICs becoming
payable only when earnings exceed the thresholds. However, primary
contributions (see
NIM01001) are treated as having been
paid on earnings at the LEL (see NIM01005) up to and including the
Primary Threshold (see also
NIM01007 covering ‘Notional
Primary’).
There is also an Upper Earnings Limit (‘UEL’).
Until 5 4 2003 the UEL was the maximum amount of earnings upon
which primary Class 1 NICs are payable (see
NIM01009).
For guidance on the structure of primary Class 1 NICs from 6
April 2003, see
NIM01100.
For further guidance on calculating and recording NICs,
including NIC rates, see
NIM11000 onwards. If aggregation of
earnings is involved (
NIM01004), see also
NIM10000 onwards.
Where employers operate contracted-out pension schemes they and
their employees who are members of the schemes receive a reduction
in their NICs. The reduction, for both employees and employers, is
realised via a reduction in the NICs percentage rate applied to
earnings between the LEL and the UEL. The percentage rate differs
for employees and employers and for the different types of
contracted-out schemes. The difference between the full contracted-
out rate and these reduced rates is known as the contracted-out
rebate’.
For further information about contracting-out, see
NIM01017. For further guidance on
calculating and recording the contracted-out rebate, including
rebated rates, see NIM11000 onwards. If aggregation of earnings is
involved (NIM01004), see also NIM10000 onwards.
