NIM10025 – Aggregation of Earnings: Calculation & recording: NICs due at Contracted-out & Not Contracted-out rate: Appropriate Personal Pension (APP) in place: Not contracted- out earnings do not reach LEL but total earnings do: Tax years 1998/1999 & earlier

All examples on this page use the 1998-99 rates and earnings bands. NICs are worked out using the exact percentage method and are based on the employee being a member of a Contracted-Out Salary Related (COSR) scheme.

When calculating NICs, priority is given to the contracted-out earnings. NICs are worked out on the total earnings using the shortest earnings period of the contracted-out employment(s).

Employee’s NICs are worked out at the:

• initial percentage rate on earnings up to and including the LEL
• main contracted-out percentage rate on any earnings above the LEL up to and including the UEL.

Employer’s contributions are worked out at the:

• appropriate not contracted-out rate on earnings up to and including the LEL
• appropriate contracted-out rate on the balance of earnings up to and including the UEL
• highest not contracted-out rate on any earnings above the UEL.

EXAMPLE

A. Chapman earns £50 per week from his not contracted-out job, and £400 per week from his contracted-out job. Total earnings are £450 per week and the earnings period is weekly.

Employee’s NICs due: £33.70 (Table letter D)

Employer’s NICs due: £33.42 (Table letter D)

Recording the NICs due on form P11

NICs will be recorded under contribution Table letter D on one form P11 with the end of year totals, again under contribution Table letter D on one P14. The entries on the P11 will be as follows:-

Recording the end of year totals on form P14

(The entries below assume the level of earnings remained unchanged throughout the year)