Calculating NICs deductions (paper methods)
Class 1 National Insurance contributions (NICs) are made up of two components:
- employer's contributions, which you must pay if you're an employer
- employee's contributions, which you must deduct from an employee's pay
If you maintain the paper form P11 Deductions Working Sheet, you'll need to work out how much NICs you need to pay as an employer and how much NICs you need to deduct from each employee's pay. You'll also need to complete the NICs columns on form P11.
You can work out the NICs figures using the free NICs calculators on
our website and on the Employer CD-Rom. You could also work out the
NICs using manual tables, but using the calculators will save you time
and help reduce errors.
On this page:
- Using the correct National Insurance category letter
- Using the NICs calculator and paper form P11
- Calculating directors' NICs
- Working out NICs using National Insurance tables
- Example - working out NICs using tables
- Where to start completing the form P11
- Benefits of using non-paper methods
- More useful links
Using the correct National Insurance category letter
Whatever method you use to work out NICs, you must make sure that you use the right category letter for the employee. The category letter is also called the National Insurance (NI) table letter. It determines the rate of NICs the employee pays and depends on:
- whether they're in a pension scheme - and if so what type
- their age
- whether they've got more than one job
- whether they're entitled to pay reduced rate NICs
The category letter has nothing to do with the letter at the end of the employee's NI number - be careful not to confuse the two.
For most men aged between 16 and 64 - and most women aged between 16 and 59 - you'll use the category letter A. But always check you're using the right letter - don't just assume that it'll be A. You can use a flowchart on the HM Revenue & Customs (HMRC) website to help you work out which category letter to use.
View a flowchart to help you work out which category letter to use (PDF 42K)
Using the NICs calculator and paper form P11
The easiest way to work out the NICs you'll need to deduct from an employee's pay - and how much you'll need to pay as an employer - is to use our free NICs calculator. This will also give you the figures you'll need to put in columns 1a to 1e of form P11.
If you use the calculator you won't need to use the NICs tables or do any calculations yourself.
The calculator is available on our website and also on the Employer CD-Rom. If you use the CD-Rom version, make sure you've got the most up to date one. We send you the CD-Rom in your New Employer Starter Pack when you register as an employer. We also send out an updated version in February each year and again in May to reflect any budget changes.
You can order a copy of the latest CD-Rom online (use the link below) or through our Employer Orderline on Tel 08457 646 646, open from 8.00 am to 8.00 pm, Monday to Friday and from 10.00 am to 1.00 pm on Saturdays, except Christmas Day, Boxing Day and New Year's Day.
Although you can't save the results from the calculator directly you can copy and paste them into other applications and then save them there.
Information you'll need for the calculator
You'll need the following information to hand to work out NICs using the calculator:
- the right category letter for the employee
- the employee's form P11 Deductions Working Sheet
- the employee's wage records
The calculator is easy to use. You just need to choose the length of the pay period (weekly, two weekly, four weekly or monthly), enter the gross pay for NICs purposes for the period and select the employee's category letter.
Note that the gross pay figure you need to use for NICs purposes may not be the same as the one you use for PAYE (Pay As You Earn) tax purposes - because NICs are worked out separately for each pay period on a non-cumulative basis, you don't need to worry about any previous earnings in the tax year. You can find out what to include in gross pay for NICs purposes in booklet CWG2 'Employer's Further Guide to PAYE and NICs'.
The calculator will tell you:
- how much employer's NICs you'll need to pay
- how much NICs you'll need to deduct from your employee's pay
- which figures to put in columns 1a to 1e of form P11.
Use the NICs calculator on the HMRC website
Order the Employer CD-Rom online
Download booklet CWG2 'Employer's Further Guide to PAYE and NICs' (PDF 462K)
Calculating directors' NICs
Special rules apply when you're working out NICs for company directors.
Directors have an annual earnings period. This means that, although you can work out NICs for each pay period in the same way as for other employees, you'll need to recalculate the NICs due on an annual basis at the end of the tax year - or when the person stops being a director if this happens during the tax year.
You'll need to use the separate calculator for directors at the end of the year to reassess their NICs using an annual earnings period. This calculator is available on our website and on the Employer CD-Rom.
If the director's appointed part way through the tax year, the calculator carries out the annual earnings period check on a pro-rata basis from the date they were appointed.
You should only use this calculator to do a reassessment at the end of the tax year or when a directorship ends. Don't use it for any other assessments.
To do the check, you'll need:
- the director's NI category letter
- their earnings for the tax year
- details of any employer's and employee's NICs paid in the tax year
The calculator will work out any further employer's and employee's NICs now due.
Use the directors' annual earnings period calculator
Download manual CA44 'National Insurance for Company Directors' (PDF 277K)
Working out NICs using National Insurance tables
You can work out the NICs figures manually using National Insurance (NI) tables. But this method is more cumbersome and time consuming than using the calculators and errors are more likely.
You can download or order copies online below. You can also order copies from our Employer Orderline.
Before you use the tables it's important to know:
- you're using the correct category letter for the employee
- you've got the right table for the category letter
- you're using the tables for the right tax year
You'll also need to know the employee's gross pay (for NICs purposes) for the pay period - this isn't necessarily the same as gross pay for PAYE purposes. You can find out what to include in gross pay for NICs purposes in our booklet CWG2 'Employer's Further Guide to PAYE and NICs'.
Using the right NI tables
There are various NI tables for different category letters, as follows:
- CA38 - tables A and J
- CA39 - contracted out contributions for employers with contracted out salary related schemes
- CA40 - tables A and B (employee only contributions for employers)
- CA41 - tables B and C
- CA42 - tables for foreign going mariners and deep sea fishermen
- CA43 - contracted out contributions and minimum payments for employers with contracted out money purchase schemes
View booklet CWG2 'Employer's Further Guide to PAYE and NICs' (PDF 462K)
Example - working out NICs using tables
If, for example, your employee's NIC category letter is A, you'd use booklet CA38 as follows:
- turn to table
- in the left hand column of the table 'Employee's Earnings up to and including the Upper Earnings Limit (UEL)' look up the employee's gross pay
- if the exact amount isn't shown in the table, use the next smaller figure - see the following examples
Important - if your employee's earning are the same as or more than the Lower Earnings Limit (LEL), £90 per week or £390 for 2008-09, you must record them on form P11 even if no NICs are actually payable.
Example 1 - copying the information onto form P11 when paying weekly
- You pay your employee £201.92 on 25 May 2008. This corresponds to week number 8.
- You use weekly table A to find the next smaller figure, which is £201.00 in this example.
- You read across from £210 in the left hand column and copy the entries from columns 1a to 1e of weekly table A to columns 1a to 1e of form P11.
View an example of NICs entries on form P11 for an employee paid weekly (PDF 80K)
Example 2 - copying the information onto form P11 when paying monthly
- You pay your employee £450.50 on 25 May 2008 for the month. This is month number 2.
- You look at monthly table A to find the next smaller figure, which is £449.00 in this example.
- You copy the figures from columns 1a to 1e of the monthly table A to columns 1a to 1e of form P11.
View an example of NICs entries on form P11 for an employee paid monthly (PDF 79K)
Where to start completing form P11
Form P11 is like a spreadsheet - it's split into columns and rows. Each row represents a week number - for example, the first week's row represents week 1 and covers the period from 6 April to 12 April inclusive.
The week numbers are grouped into month numbers 1 to 12. So the first four week numbers, for example, are grouped into month 1.
If you pay your employee weekly, start with the row representing the week that includes the first payday.
If you pay your employee monthly, find the month that includes the first payday. Start with the row that represents the week in that month that includes the first payday.
View an example of where to start form P11
for an employee paid weekly (PDF 40K)
View an example of where to start form P11
for an employee paid monthly (PDF 37K)
Benefits of using non-paper methods
Using non-paper methods of completing form P11, like our free P11 Calculator on the Employer CD-Rom or commercial payroll software, can save you time and help reduce errors. It is the intention that all employers must file their Employer Annual Return online from April 2010 and using non-paper methods makes this much easier. There is a tax-free payment available to employers with fewer than 50 employees who file online before 2010. Find out more by linking to our related guidance below.
Choose a payroll software system
Read about using the Employer CD-Rom P11 Calculator
More about deadlines and incentives for filing PAYE online
