ESM3232 - Application of the NICs rules: annual earnings period - example
This example illustrates how to work out how much NICs has to be
paid over at the end of the year in respect of the deemed payment
where a company is involved and a salary has been paid during the
year.
Mr F works through his service company, F Services Ltd. The
company has relevant engagements during the year ended 5 April
2001. A deemed payment of £10334 is treated as paid at the end
of the year. Mr F also received a salary of £20,000 during the
year. His total earnings in the year are therefore £30,334
The employer’s NICs on the deemed payment is
£1,261 and on the salary is £1,905.
Employment Income tax and Class 1 NICs are due on the total
amount of earnings paid in the year and on the deemed payment.
The Class 1 NICs that are payable are as follows:
Employer’s Class I NICs
| Total earnings in year | 30,334 |
| Employer’s NICs on total earnings* | 3,166 |
| Deduct | |
| Employer’s NICs already paid in year on salary | 1,905 |
| Additional employer’s NICs payable on deemed payment | 1,261 |
*this is calculated by:
subtracting the Employer’s Earnings Threshold
(£4,385) from the total earnings (£30,334) in the year;
and
then multiplying the resulting amount (£25,949) by the
employer’s NIC percentage rate for the period (in this case
12.2%).
Employee’s Class 1 NICs
| Employee’s NICs due+ | 2,343 |
| Employee’s NICs already paid in year on salary | 1,605 |
| Additional employee’s NICs payable | 738 |
+this is calculated by:
subtracting the Employee’s Earnings Threshold
(£4,385) from the Upper Earnings Threshold (or total earnings
if lower) (£27,820); and
multiplying the resulting amount (£23,435) by the
appropriate employee’s NICs percentage rate (in this case
10%).
