NIM10037 – Aggregation of Earnings: Calculation & recording: NICs due at contracted-out & not contracted-out rate: No Appropriate Personal Pension (APP) in place: Contracted-out earnings reach or exceed UEL: 2000/2001 tax year

All examples on this page use the 2000/2001 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 appropriate contracted-out percentage rate on contracted-out earnings above the employee’s earnings threshold (EE/ET) up to and including the UEL. Employer’s NICs are worked out at the:

• appropriate contracted-out percentage rate on the contracted-out earnings above the employer’s earnings threshold (ER/ET) up to and including the UEL
• appropriate not contracted-out percentage rate on the balance of the total earnings.

EXAMPLE

J. West earns £2,500 per month from his contracted-out job and £800 per month from his not contracted-out job. Total earnings are £3,300 per month and the earnings period is monthly.

Employee’s NICs due: £167.16 (Table letter D)

Employer’s NICs due: £299.45 (Table letter D)

Employee’s NIC rebate due: £0.61

Employer’s NIC rebate due: £2.22

Recording the NICs due on form P11

NICs will be recorded under contribution Table letter D on one form P11 and the end of year totals, again under contribution Table letter D, on one form 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)