For the 2000/2001 tax year there was a Lower Earnings Limit (‘LEL’ – see NIM01005), a Primary Threshold (‘PT’ – see NIM01008 - sometimes known as the Employee’s Earnings Threshold or ‘EE/ET’) and a Secondary Threshold (‘ST’ – see NIM01008 – sometimes known as the Employer’s Earnings Threshold or ‘ER/ET’). No NICs were paid on earnings between the LEL and the Primary/Secondary Thresholds, with employees and employers only becoming liable to pay NICs once the employee’s earnings had exceeded their respective threshold limit (see also NIM01007 covering ‘Notional primary’). There was also an Upper Earnings Limit (‘UEL’) which was the maximum amount of earnings upon which primary Class 1 NICs were payable – see NIM01009. 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 this reduced rate is known as the ‘NIC
rebate’.
For further information about contracting-out, see
NIM01017. For further guidance on
calculating and recording the NIC rebate, including rebated rates,
see
NIM11000 onwards. If aggregation of
earnings is involved (
NIM01004), see also
NIM10000 onwards.
