NIM10039 - Aggregation of Earnings: Calculation & recording: NICs due at contracted-out & not contracted-out rate: No Appropriate Personal Pension (APP) in place: Contracted-out earnings exceed LEL but do not reach EE/ET: 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 not contracted-out percentage rate on not contracted-out earnings above the EE/ET up to and including the UEL. Employer’s contributions are worked out at the appropriate not contracted-out percentage rate on the total earnings above the ER/ET.

EXAMPLE

W. Clark earns £310 per month from his contracted-out job, and £400 per month from his not contracted-out job. Total earnings are £710 per month and the earnings period is monthly.

Employee’s NICs due: £38.10 (Table letter A)

Employer’s NICs due: £42.09 (Table letter A)

Employee’s NIC rebate due: £0.30

Employer’s NIC rebate due: £0.57

Recording the NICs and NIC rebates due on form P11

NICs and NIC rebates will be recorded on two separate P11s – one for the contracted-out NIC rebates and one for the not contracted-out NICs. One form P14 should be completed at the end of the year showing two separate entries – one for the contracted-out earnings and NIC rebates and one for the not contracted-out earnings and NICs under their appropriate contribution Table letters. The entries on the P11 will be as follows:-

For contracted-out NIC rebates

For not contracted-out NICs

Recording the end of year totals on form P14

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