HOW THE NATIONAL INSURANCE FOR EMPLOYEES IS CACULATED

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National insurance for employees

Our accounting firm in the UK will calculate the amount of National Insurance you can expect to pay in a particular tax year.

Read more: https://www.which.co.uk/money/tax/tax-calculators/national-insurance-calculator-aw6yt3g6vd0g – Which?

NATIONAL INSURANCE FROM EMPLOYED EARNINGS.

The national insurance paid by an employee is Uk are as follow:

Class 1 national insurance:

There are two types of Class 1.

  • The Class 1 primary(employee).
  • Class 1 secondary(employers).

The Class 1 primary national insurance

This tax is deducted from employee’s income when they go over the threshold.

The threshold depends on the frequency of the payments.

In the tax year 2019/20,

For weekly paid earners: Income earned over £166.

Monthly paid employees: Income over £962.

A yearly threshold is applied to Directors: Income over £8632.

Rates applied to Class 1 national insurance.

The rate that will be applied would depend on the categories of the taxpayer.

Also, the frequency for payment and amount earned will also be considered.

Most common caterogies for most employees is  Categories A.

 The rate for categories A:

Class I primary deduction for weekly paid earners that receive income between £166 to £962 is 12% and 2% for any amount over.

For income earned monthly between £719 and 4167 is the rate applied is 12 %.

Any amount earned above this is at 2%.

Other categories.

  •  B: for married and widow entitled to pay reduced contributions.
  •  C: These are for employees over the state pension age.
  • J: These are for the employee that defers their contributions.
  • H: This code is for apprentice under 25.
  • M: Employees under 21 years old.
  • Z: Employees under 21 who defer their NI.
  • X: Employees under 16.

The Class 1 secondary national insurance.

For an employee earning over £166, the employers pay 13.8% and there is no upper limit.

The employer can claim employment allowance for this expense but they must qualify to claim this relief.

This allowance gives relieves to employers by allowing the deduction of £3000 from their PAYE bill.

Class 1A national insurance.

Employers that provide benefits to their employees pay Class IA.

Benefit such as cars,medical,travel,e.t.c.

Whenever an employee receives such benefit, they pay tax on the cost of the benefit to the employer whilst their employer pays Class 1A.

The percentage of Class 1A  is 13.8 % which is applied to the cost of the benefit.

Class 3 National Insurance.

Some individuals do not pay national insurance because they have not gone over the threshold.

Such taxpayers could make voluntary contribution also referred to as Class 3.

If eligible they will have to make an arrangement with HMRC on the frequency of the payment and amount pay.

It could be made either monthly, quarterly, yearly.

To contact HMRC to make such an arrangement you can click.

Conclusion.

To learn more about this tax deduction, you can click.

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