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National Insurance forcompany directors

This booklet gives detailed information about paying National Insurancecontributions (NICs) for company directors.

It also tells you about special or unusual cases.

Use from 6 April 2014

CA44 (2014)National Insurance

contributions series

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Help and guidance You can get help and guidance from the following sources.

The internetFor help with your payroll go to,www.hmrc.gov.uk/payerti/index.htm

For wider interactive business help go towww.gov.uk/starting-up-a-business

Webinars are a new way of learning about your payroll.

Our presentations cover a wide range of topics. For moreinformation, go to www.hmrc.gov.uk/webinars

Any page printed from the online version of this helpbook isuncontrolled and may not be the latest version. We recommendthat you always check you are referring to the latestonline version.

Online servicesFor information and help using our Online Services,go to www.hmrc.gov.uk/online

For more help, contact the Online Services Helpdesk by:

phone on 0300 200 3600 , or textphone on 0300 200 3603 .

Basic PAYE Tools The Basic PAYE Tools is software that you download onto yourcomputer. It will help you run your payroll throughout the year.It is designed for employers who have nine or fewer employees,and you can use it to calculate payroll deductions and thenreport payroll information online in real time.

Basic PAYE Tools will: record your employees details work out and record your employees pay, tax, NICs and any

Student Loan deductions every payday enable you to claim your NICs Employment Allowance (up to

2,000 per year off your secondary Class 1 NICs liability) generate the payroll data that you need to send to HMRC in

real time, including starter and leaver information produce an Employer Payment Record that works out how

much you need to pay HMRC contain calculators to help you to work out statutory

payments such as Statutory Sick Pay and StatutoryMaternity Pay.

You can find more information about the Basic PAYE Tools atwww.hmrc.gov.uk/payerti/getting-started/payroll-system.htm

Employer helplines Employer for less than 3 years, phone 0300 200 3211 . Employer for 3 years or more, phone 0300 200 3200 . If you have a hearing or speech impairment and use a

textphone, phone 0300 200 3212 .

Please tell us your employer PAYE and Accounts Officereferences when you contact us. You will find them oncorrespondence from HMRC.

Employer helpbooks and formsHelpbooks and forms are available to download. Go towww.hmrc.gov.uk/payerti/forms-updates/forms-publications.htm

Exceptionally, if you dont have access to the internet, someof our helpbooks and forms are available from the EmployerOrderline on 0300 123 1074 .

Yr laith GymraegI lawrlwytho ffurflenni a llyfrynnau cymorth Cymraeg, ewch iwww.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.htm #2 a dilyn y cysylltiad i Becyn y Cyflogwr. Os, yn eithriadol,nad oes gennych gysylltiad ir rhyngrwyd, cysylltwch r GanolfanGyswllt Cymraeg ar 0300 200 1900 .

Forms and guidance in Braille, largeprint and audio

For details of employer forms andguidance in Braille, large print or audio,phone the Employer Orderline on0300 123 1074 and ask to speak to theCustomer Service Team.Education services from the Digital Delivery TeamFind out more about our webinar programme atwww.hmrc.gov.uk/webinars and why not take a look at our

Youtube channel? You can view our video clips or listen to a

recorded version of our webinars. Go towww.youtube.com/hmrcgovuk

Employer Bulletin onlineEmployer Bulletins contain information and news for employers.

We publish these several times a year. Go to www.hmrc.gov.uk/ payerti/forms-updates/employer-bulletin/index.htm

Employer email alerts We strongly recommend that you register to receive employeremails to prompt and direct you to: each new edition or news about the Basic PAYE Tools the Employer Bulletin important new information.

To register, go to www.hmrc.gov.uk/payerti/forms-updates/ forms-publications/register.htm

HM Revenue & Customs (HMRC)If you have a query about your PAYE scheme: phone the Employer Helpline on 0300 200 3200 , or write to:

HM Revenue & CustomsNational Insurance Contributions & Employer Office

BP4009Chillingham HouseBenton Park ViewNEWCASTLE UPON TYNENE98 1ZZ

Please tell us your employer PAYE and Accounts Officereferences when you contact us. You will find them oncorrespondence from HMRC.

Your rights and obligationsYour Charter explains what you can expect from us and whatwe expect from you. For more information go towww.gov.uk/hmrc/your-charter
http://www.hmrc.gov.uk/payerti/index.htmhttp://www.gov.uk/starting-up-a-businesshttp://www.hmrc.gov.uk/webinarshttp://www.hmrc.gov.uk/onlinehttp://www.hmrc.gov.uk/payerti/getting-started/payroll-system.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications.htmhttp://www.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.htm#2http://www.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.htm#2http://www.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.htm#2http://www.hmrc.gov.uk/webinarshttp://www.youtube.com/hmrcgovukhttp://www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications/register.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications/register.htmhttp://www.gov.uk/hmrc/your-charterhttp://www.gov.uk/hmrc/your-charterhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications/register.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications/register.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htmhttp://www.youtube.com/hmrcgovukhttp://www.hmrc.gov.uk/webinarshttp://www.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.htm#2http://www.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.htm#2http://www.hmrc.gov.uk/payerti/forms-updates/forms-publications.htmhttp://www.hmrc.gov.uk/payerti/forms-updates/forms-publications.htmhttp://www.hmrc.gov.uk/payerti/getting-started/payroll-system.htmhttp://www.hmrc.gov.uk/onlinehttp://www.hmrc.gov.uk/webinarshttp://www.gov.uk/starting-up-a-businesshttp://www.hmrc.gov.uk/payerti/index.htm

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ContentsIntroduction 2

The rules for company directors 2

Alternative arrangements for theassessment of directors NICs 3

Applying the annual (or pro rata annual)earnings period rules 6

Directors earnings 8

Working out NICs 10

Paying NICs on account 11

More than one job 11

Change in category of contribution payable 17

Recording NICs information 26

PAYE Online for Employers 27

Special circumstances 28

Statutory payments 30

Quick guide to pro rata annual earnings periods 31 Alphabetical index 32

CA44 1

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Introduction1 About this booklet

This booklet: replaces the April 2013 edition of CA44 National

Insurance for Company Directors gives detailed information about the different

National Insurance contributions (NICs) rules for

company directors can also be used for employees who have annual or

pro rata annual earnings periods.

The normal rules about NICs can be found atwww.hmrc.gov.uk/payerti in the CWG2(2014)Employer Further Guide to PAYE and NICs.

There are legal requirements that mean employersmust comply with their obligations. At the time ofwriting, this guide sets out HMRCs view on how theselegal requirements can be met. It will be updatedannually and was last updated December 2013.

All the examples in this booklet: use the 201415 NICs rates and limits, and are for illustration purposes only.

If you are unhappy with our serviceIf you are unhappy with any aspect of the service youhave received from us, you should complain to themanager at the office you have been dealing with.

2 National Insurance contributions (NICs)Employment Allowance

From 6 April 2014, you may be eligible to claim anEmployment Allowance of up to 2,000 per year

available for businesses, charities andCommunity Amateur Sports Clubs to offset againstemployers secondary Class 1 NICs liability.

You can claim the Employment Allowance as part ofthe normal payroll process through Real TimeInformation (RTI) or the Basic PAYE Tools.

For more information, details of eligibility and how toclaim the Employment Allowance see CWG2 Chapter 3,paragraph 89 and go towww.hmrc.gov.uk/nicsemploymentallowance

(Introduction of the Employment Allowance from

6 April 2014 is subject to Parliamentary approval of thelegislation in the NICs Bill.)

The rules for company directors3 Introduction

This section describes what you need to know to workout NICs for company directors.

4 Company directorsWho is a company director?

For NI purposes, Regulation 1 of the Social Security(Contributions) Regulations 2001 defines a companydirector as: a member of a board or similar body where the

company is managed by a board or similar body a single person where the company is managed by

an individual.

Or, if a director as defined in either of the above isaccustomed to acting under the instructions of anotherperson, that person will be a director. This additionalrule will not apply if the other persons instructions arelimited to professional advice, for example, the advicegiven by a solicitor.Directors of building societies which have notdemutualised are not normally company directors forNI purposes.

What is a company director liable for?For NI purposes, a company director is classified as anoffice holder.

Under Section 2(1) of the Social Security Contributionsand Benefits Act 1992, (in Northern Ireland,Section 2(1) of the Social Security Contributions andBenefits (Northern Ireland) Act 1992) an office holder is

liable for Class 1 NICs on earnings.

5 What you should do To assess NICs for company directors: use an annual (or pro rata annual) earnings period to

work out NICs work out NICs on the total earnings paid to the

director each time a payment of earnings is made deduct the NICs already paid, if any, to arrive at the

amount of NICs now due include all the directors earnings when working out

NICs, including fees and bonuses

record NICs information on one payroll record unlessthis booklet tells you otherwise

you can adapt the NICs tables to work out NICs(see paragraph 42 on page 10)

you can use the exact percentage method to workout NICs (see paragraph 41 on page 10).

Alternatively You can apply the arrangements for the assessmentand payment of directors NICs outlined inparagraphs 6 to 9 (see pages 3 to 6).

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Alternative arrangements for theassessment of directors NICs

6 How it worksSince 6 April 1999 we have operated alternativearrangements for the assessment and payment of NICsfor company directors.

Under Regulation 8 of the Social Security(Contributions) Regulations 2001, the earnings periodfor the assessment of directors NICs remains anannual one. But, subject to the qualifying conditionsin paragraph 9 (on page 6), you can, if you wish, makepayments on account of directors NICs during thetax year based on the actual intervals of payment usually weekly or monthly in the same way as forother employees.

If you do choose to pay NICs in this way you shouldapply the normal rules for assessing NICs, as set outin the CWG2(2014) Employer Further Guide to

PAYE and NICs .

7 Last payment of earnings in tax year (ordirectorship)

Normally you should assess NICs using the shorterearnings period throughout the year until the lastpayment of earnings in the tax year (or directorship) isbeing made (but see paragraph 8 on page 6).

When the final payment of the directors earnings inthe tax year (or directorship) is being made, you must: reassess the NICs due on the directors total earnings

for the tax year on the basis of an annual (or pro rataannual) earnings period, as appropriate

either deduct the amount of primary contributionsthen due from the payment or, if the earnings areinsufficient to cover the primary contributions thendue, pay the balance yourself

adjust the final (or, if the director leaves or diesduring the year, the next) remittance in the tax yearto us to take into account the reassessment.

Remember, even if you use the weekly or monthlyrates and limits to work out NICs throughout the year,because directors have an annual earnings period you

must still reflect the annual or pro rata annual: Lower Earnings Limit (LEL) Primary Threshold (PT) Upper Accrual Point (UAP), and Upper Earnings Limit (UEL)

figures at the final reassessment. Under this particulararrangement, regardless of the method used to workout NICs during the year, you can use either the exactpercentage method or adapt the NICs tables to workout the NICs at the final reassessment.

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8 What to do if the director receives abonus or the category of contributionpayable changes during the year

In many cases, directors will receive a bonus duringthe year. Waiting until the final payment of earningsto carry out the reassessment could lead to adisproportionate amount of primary NICs being payableat the year end.

Similarly, directors changing from not contracted-outto contracted-out employment, for example during the

year, may mean that any refund of NICs due will not bepaid until the reassessment takes place at the end ofthe year.

In these circumstances you can, if you wish, carry outthe reassessment at the time of the change. However,

you must then continue to use the appropriate annual(or pro rata annual) earnings period rules, as describedin this booklet, for the rest of that tax year.

9 Qualifying conditions for thealternative arrangements You will be able to take advantage of thisarrangement if: the director agrees to NICs being assessed in this

way, and the director normally receives his earnings in a

payment pattern for which a regular earnings periodcan be established for the assessment of NICs, and

those payments normally exceed the LEL for the payperiod concerned.

Applying the annual (or pro rataannual) earnings period rules10 Earnings limits, Primary Threshold (PT),

Secondary Threshold (ST) andUpper Accrual Point (UAP)

Both the director and the company are liable for Class 1,that is, employed-earners NICs when the directors totalearnings reach the Lower Earnings Limit (LEL). But thedirector only pays NICs if the directors total earningsexceed the Primary Threshold (PT) and the company

only pays NICs if the directors total earnings exceed theSecondary Threshold (ST).

The director and the company pay NICs at theappropriate contracted-out or not contracted-outpercentage rate on all earnings above the PT and STrespectively, up to and including the Upper AccrualPoint (UAP). They then pay at the appropriate notcontracted-out percentage rate on earnings above theUAP up to the Upper Earnings Limit (UEL).

If the directors total earnings reach or exceed theUEL, the director pays NICs only at a rate of 2% on anyearnings which exceed the UEL. The company pays NICsat the appropriate not contracted-out percentage rateon all earnings above the UAP, including those whichexceed the UEL.

The annual earnings limits, thresholds and UAP are thesame as for other employees.

For more information about National Insurance ratesand thresholds go to www.hmrc.gov.uk/payerti

11 Lower Earnings Limit (LEL)If the director has: an annual earnings period, do not record the earnings

details for NICs purposes until the directors totalearnings for the tax year reach or exceed theannual LEL

a pro rata annual earnings period, do not recordthe earnings details for NICs purposes until thetotal earnings paid to the director since the date ofappointment reach or exceed the pro rata annual LEL.

See paragraph 26 on page 8 for details of how to workout pro rata annual earnings limits, PT, ST and UAP.

12 Primary Threshold (PT)If the director has:

an annual earnings period, no NICs are due from thethe director until the directors total earnings for thetax year exceed the annual PT

a pro rata annual earnings period, no NICs are duefrom the director until the total earnings paid to thedirector since the date of appointment exceed thepro rata annual PT.


13 Secondary Threshold (ST)If the director has: an annual earnings period, no NICs are due from the

company until the directors total earnings for the tax year exceed the annual ST

a pro rata annual earnings period, no NICs are duefrom the company until the total earnings paid to thedirector since the date of appointment exceed thepro rata annual ST.


14 When total earnings exceed the Primary Threshold (PT)

When the total earnings in the tax year or pro rataperiod exceed the PT, the director pays NICs on thoseearnings which exceed the PT.

15 When total earnings exceed theSecondary Threshold (ST)

When the total earnings in the tax year or pro rataperiod exceed the ST, the company pays NICs on thoseearnings which exceed the ST.
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16 Upper Accrual Point (UAP) The director and the company pay NICs at theappropriate contracted-out or not contracted-outpercentage rate on all earnings above the PT and STrespectively, up to and including the UAP. They thenpay at the appropriate not contracted-out percentagerate on earnings above the UAP up to the UEL.


17 Upper Earnings Limit (UEL) The director pays NICs on all earnings above the PT upto and including the employees annual (or pro rataannual) UEL, but only at a rate of 2% on those earningswhich exceed the UEL.

The company pays NICs at the appropriatecontracted-out or not contracted-out percentage rateon all earnings above the ST, up to and including theUAP, then at the not contracted-out percentage rate on

those earnings which exceed the UAP, including thosewhich exceed the UEL.


18 National Insurance contributions rates The percentage rates you use to work out directors NICsdepend on a number of factors.

The directors NICs, if any, depend on: the directors age whether the director has a married womans or

widows election whether the director is a member of the companys

contracted-out Occupational Pension Scheme.

The companys NICs depend on whether the director is amember of the companys contracted-out OccupationalPension Scheme.

For more information about National Insurance ratesand thresholds go to www.hmrc.gov.uk/payerti

19 Directors paying reduced rate NICsIf the director is a married woman or widow who isentitled to pay reduced rate NICs and wants to

continue paying at a reduced rate, she pays NICs atthe reduced rate on all earnings above the annual (orpro rata annual) PT up to and including the annual (orpro rata annual) UEL. But she still pays at a rate of 2%on these earnings which exceed the UEL. You must holda valid form: CA4139, or CF383 Certificate of Election , or CF380A Certificate of Reduced Liability for these directors.

20 Directors over State Pension ageIf earnings are paid or are due to be paid on or afterState Pension age, the director pays no NICs. You willneed to obtain sight of the directors birth certificateor passport as evidence of their date of birth, both ofwhich can be copied and kept on file as proof thatClass 1 NICs are not payable.

21 Companys NICs The percentage which you use to work out thecompanys NICs depends if the directors employment is: not contracted-out, that is, the director belongs to

the State Second Pension, previously known as theState Earnings Related Pension Scheme (SERPS), or

contracted-out, that is, the director belongs tothe companys Contracted-out Salary RelatedPension Scheme.

If the director pays reduced rate NICs, the company paysNICs as normal at the appropriate not contracted-out orcontracted-out rate(s).

If the director is over State Pension age, the companypays NICs at the appropriate not contracted-outpercentage rate even if the director was contracted-outbefore State Pension age.

22 Earnings periods The interval at which employees are paid is usually the

earnings period but directors are different.Even if the directors are paid weekly or monthly, theirearnings period is: annual, or pro rata annual.

23 Annual earnings period A person who is a director at the beginning of the tax year (6 April) has an annual earnings period for thattax year even if they cease to be a director before thetax year ends (5 April).

The annual earnings period runs from 6 April to 5 April.

24 Pro rata annual earnings periodDirectors first appointed during the tax year have apro rata annual earnings period for the remainder ofthat tax year.

You need to work out the: number of weeks in the pro rata period pro rata annual LEL pro rata annual PT pro rata annual ST pro rata annual UAP pro rata annual UEL.

See the Quick guide to pro rata annual earningsperiods on page 31.

25 Number of weeks in the pro rata annualearnings period

The number of weeks in the pro rata annual earnings

period is: the tax week of appointment, and the remaining tax weeks in the tax year.

There are 53 weeks in the tax year but use 52 weekswhen working out the pro rata period. Ignore 5 April

or 4 and 5 April in a leap year, which is week 53. But ifsomeone is appointed in week 53 the pro rata period isone week.


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26 Working out the pro rata limits,Primary Threshold, Secondary Thresholdand Upper Accrual Point

To work out the: LEL, multiply the weekly LEL by the number of tax

weeks in the pro rata earnings period PT, divide the annual PT by 52, multiply the answer

by the number of tax weeks in the pro rata earningsperiod and round up to the next whole pound

ST, divide the annual ST by 52, multiply the answerby the number of tax weeks in the pro rata earningsperiod and round up to the next whole pound

UAP, multiply the weekly UAP by the number of taxweeks in the pro rata earnings period

UEL, divide the annual UEL by 52, multiply the answerby the number of tax weeks in the pro rata earningsperiod and round up to the next whole pound.


27 Director resigns during the tax yearIf a director resigns during the tax year, the earningsperiod does not change.

28 Director resigns and is reappointedIf the director resigns during the tax year and isreappointed by the same company: in the same tax year, the earnings period is the one

which applied before resignation at the beginning of a later tax year, the earnings

period is annual for the later tax year

during a later tax year, the earnings period is pro rataannual for the later tax year.

Directors earnings29 What is included?

CWG2(2014) Employer Further Guide to PAYE and NICs gives details of what is and what is not included in grosspay when working out NICs. CWG5(2014) Class 1A NICson benefits in kind gives details of what taxable benefitsin kind attract Class 1A NICs.

The same rules apply to directors as for other

employees but there are some additional rulesfor directors.

30 Fees and bonusesNormally, when fees and bonuses are voted to directors,the fees or bonuses are added to all other earnings paidin the annual (or pro rata annual) earnings period andNICs are assessed on the total.

The NICs rates used are normally those which relateto the earnings period.

But there are exceptions to this rule.

31 Advance or anticipatory paymentsPayments made in advance or in anticipation ofthe voting of fees or bonuses are earnings forNICs purposes.

NICs are due from the director and the company whenthe payments exceed the annual (or pro rata annual) PTand ST respectively which applies when they are made.

Use the NICs rates which relate to that earnings period.

NICs paid on advance or anticipatory payments andfees or bonuses are later votedIf NICs have been paid on advance or anticipatorypayments and fees or bonuses are later voted, NICsare due on the fees or bonuses minus the advance oranticipatory payments already made.

Use the NICs rates and the earnings period which relateto when the voting takes place.

NICs not paid on advance or anticipatory paymentsand fees or bonuses are later votedIf NICs have not been paid on advance or anticipatorypayments because they were, in total, less than the PTand ST and fees or bonuses are later voted, NICs aredue on the full amount of the fees or bonuses whichexceeds the annual (or pro rata annual) PT and ST which

applies when the voting takes place.Use the NICs rates which relate to that earnings period.

Fees or bonuses are less than the advance oranticipatory paymentsIf the fees or bonuses are less than the advance oranticipatory payments, no further NICs are due.

Fees or bonuses waived or refundedIf the fees or bonuses are waived or refunded to thecompany, in total or in part, after they have been voted,NICs are still due on: the advance or anticipatory payments

any balance of the fees or bonuses.Director has an account with the companyIf the director has an account, for example, loan orcurrent with the company, NICs are: due when fees or bonuses are voted and the account

credited. Use the NIC rates and the earnings periodwhich apply when the voting takes place

not due when the director draws money out of theaccount if the account remains in credit.

Directors account is overdrawnIf the director draws money out of the account andit becomes overdrawn or there is an increase in theamount by which it is overdrawn, there is: liability for NICs on the overdrawn amount, or the

increase in the overdrawn amount, if the withdrawalis made in anticipation of an earnings payment, forexample, fees or bonuses. Use the NIC rates and theearnings period which apply when the withdrawalis made

no liability for NICs on the overdrawn amount, or theincrease in the overdrawn amount, if the withdrawalis made in anticipation of an introduction of fundswhich are not earnings, for example, dividends,matured insurance policies or other personal income.But there could be a liability for Class 1A NICs. SeeCWG5(2014) Class 1A NICs on benefits in kind .

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Payment of a directors personal bills through anaccount with the companyDirectors who have an account with their company mayarrange for the company to settle their personal billsand then charge the amount to their account. If youmeet a directors personal debt in this way and thendebit the amount to the account, there is liability forNICs when:

the account becomes overdrawn or there is anincrease in the amount by which it is overdrawn, and the debiting is made in anticipation of an earnings

payment, for example, fees or bonuses.

NICs are due on the overdrawn amount or the increasein the overdrawn amount. Use the NICs rates and theearnings period which apply when the accountis debited.

There is no liability for NICs if: the account becomes overdrawn or there is an

increase in the amount by which it is overdrawn, and the debit is made in anticipation of an introduction of

funds which are not earnings, for example dividends,matured insurance policies or other personal income.

32 No advance or anticipatory paymentsIf the director draws money out of the account andit becomes overdrawn or there is an increase in theamount by which it is overdrawn and the directordoes not normally receive advance or anticipatorypayments, the amount overdrawn is not earningsunless the company authorises payment of theamount(s) overdrawn.

The amount overdrawn can be authorised: in writing, or by the other directors agreeing verbally that they

know about the situation.

When the amount(s) overdrawn are properly authorised,NICs are due on the overdrawn amount(s). Use the NICsrates and the earnings period which apply when theauthority is given.

Fees voted for a future periodIf fees are voted for a future period, NICs are due fromthe director and from the company if the paymentsexceed the annual (or pro rata annual) PT and STrespectively which applies when the fees are actuallymade available to the director.

Use the NICs rates which relate to that earnings period.

33 Payments under theEmployment Rights Act 1996 inNorthern Ireland, Employment Rights(Nothern Ireland) Order 1996

If the director receives payments under the EmploymentRights Act 1996: add these payments to the directors other earnings

for the tax year in which the payment is made use the percentage rates and earnings limits whichapply at the time of payment.

34 Earnings paid for a periodbefore appointment

Earnings paid to a person before the date on whichthey were appointed as a director which relate, forexample, to when they were employees of yourcompany, are not included with the earnings paid afterthat date when the directors NICs are assessed.

Earnings paid to a person after the date on which theywere appointed as a director which relate, for example,to when they were employees of your company, are included with the other earnings paid after that datewhen the directors NICs are assessed. Use the directorsearnings period (annual or pro rata annual).

35 Earnings paid in the same tax year afterappointment ends

If earnings for the directorship are paid to a formerdirector in the same tax year as their appointment ends: add these earnings to the total earnings already paid

work out NICs on the total earnings using thedirectors earnings period.

This applies even if the director becomes an employeeof the company. For the rest of the tax year anyearnings paid, including those paid as an employee,should be assessed for NICs using the annual or, if thedirector was appointed after the beginning of the tax

year, the pro rata annual earnings period.

If the former director was in contracted-outemployment and the payment of earnings is mademore than six weeks after the appointment ends,work out NICs using the equivalent not contracted-outrate. See Change in category of contribution payable,paragraph 60 on page 17 onwards.

36 Earnings paid in a later tax year afterappointment ends

If earnings for the directorship are paid to a formerdirector in a tax year which starts after theirappointment ends: do not add these earnings to any other earnings paid

in that tax year work out NICs using an annual earnings period use the percentage rates and earnings limits in force

for the tax year in which the payment is made.If the former director is working as an employee,separately work out the NICs due on their earnings asan employee using the appropriate earnings period.

If the former director was in contracted-outemployment and the payment of earnings is mademore than six weeks after the appointment ends,work out NICs using the equivalent not contracted-outrate. See Change in category of contribution payable,paragraph 60 on page 17 onwards.

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37 Repayment of loansIf a director lends money to the company: any repayment of that loan is not earnings for

NICs purposes NICs are not due on the repayments.

38 Company pensionsIf a director receives a company pension: the pension is not earnings for NICs purposes NICs are not due on the pension payments.

NICs are due on any fees or bonuses or salary paymentswhich are paid after the director has retired from thecompany. If the director is over State Pension age: no directors NICs are due NICs are due from the company at the not

contracted-out rate.

Working out NICs39 Introduction

Directors NICs are worked out on a cumulative basisunlike other employees whose NICs are worked outeach week or each month.

NICs must therefore be worked out each time apayment of earnings is made to a director.

To work out how much you must pay: work out the NICs on the total earnings paid to date

in the tax year or pro rata period deduct the NICs already paid, if any.

This gives the NICs now due.

40 Methods of working out NICs You can work out NICs: using the exact percentage method, or by adapting the NICs tables.

You can only use one of these methods for a director ina tax year or pro rata period.

41 Exact percentage methodIf you use the exact percentage method to work outdirectors NICs, wait until the total earnings to datereach or exceed the annual (or pro rata annual) LEL.

To work out a directors standard rate NICs, multiplythose earnings which exceed the annual (or pro rataannual) PT, up to and including the annual (or pro rataannual) UAP by the appropriate not contracted-out orcontracted-out percentage rate. Round to the nearestpenny, rounding down exact amounts of 0.5p. Multiplythose earnings which exceed the annual (or pro rataannual) UAP, up to and including the annual(or pro rata annual) UEL by the appropriate notcontracted-out percentage rate. Round to the nearestpenny, rounding down exact amounts of 0.5p. Deductany employees contracted-out NICs rebate to which

the director is entitled. Multiply those earnings whichexceed the annual (or pro rata annual) UEL by 2%.Round to the nearest penny, rounding down exactamounts of 0.5p. Add the totals together.


To work out a directors reduced rate NICs, multiplythose earnings which exceed the annual (or pro rataannual) PT, up to and including the annual (or pro rataannual) UAP and from the annual (or pro rata annual)UAP up to and including the annual (or pro rata annual)UEL by the reduced percentage rate.

Round to the nearest penny at each stage, roundingdown exact amounts of 0.5p. Multiply those earnings

which exceed the annual (or pro rata annual) UEL by2%. Round to the nearest penny, rounding down exactamounts of 0.5p. Add the totals together.


To work out the companys NICs, multiply thoseearnings which exceed the annual (or pro rataannual) ST up to and including the annual (or pro rataannual) UAP by the appropriate not contracted-out orcontracted-out percentage rate. Round at each stage tothe nearest penny, rounding down exact amountsof 0.5p. Multiply those earnings which exceed the

annual (or pro rata annual) UAP, up to and including theannual (or pro rata annual) UEL by the appropriate notcontracted-out percentage rate. Round to the nearestpenny, rounding down exact amounts of 0.5p.

Deduct any employers and, if appropriate, anyemployees contracted-out NICs rebate to which thecompany is entitled. Multiply those earnings whichexceed the annual (or pro rata annual) UEL by theappropriate not contracted-out percentage rate. Roundto the nearest penny, rounding down exact amounts of0.5p. Add the totals together.


To work out how much you must pay if furtherpayments of earnings are made in the tax year orpro rata period: work out the NICs due on the total earnings to date.

Round to the nearest penny, rounding down exactamounts of 0.5p

deduct the amount of NICs already paid.


42 Adapting the NICs tables You can adapt the NICs tables to work out NICs.

You must not use the NICs tables at face valuebecause the figures shown relate to weekly ormonthly earnings periods.

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43 Adapting the monthly tablesIf the director has an annual earnings period you canadapt the monthly tables to work out the NICs due eachtime earnings, including fees and bonuses, are paid. Divide the total earnings to date by 12. This gives the

average monthly earnings to date. Look at the relevant monthly table for the average

monthly earnings. If the average monthly earnings are

less than or equal to the monthly ST, no NICsare due

more than the monthly ST, multiply the NICs in thetable by 12. This gives the NICs due to date.

Deduct NICs already paid, if any.

This gives the NICs now payable.

44 Adapting the weekly tables annualearnings period

If the director has an annual earnings period you canadapt the weekly tables instead of the monthlytables, but: divide the total earnings by 52, not 12 work out NICs on the average weekly earnings multiply the weekly NICs by 52, not 12.

45 Adapting the weekly tables pro rataannual earnings period

If the director has a pro rata annual earnings period, you can adapt the weekly tables to work out the NICsdue each time earnings, including fees and bonuses,are paid.

Work out the total number of tax weeks in thepro rata annual earnings period. Divide the total earnings paid to the director since

the appointment began by the number of tax weeksin the pro rata annual earnings period. This gives theaverage weekly earnings to date.

Look at the relevant weekly table for the averageweekly earnings.

If the average weekly earnings are less than or equal to the weekly ST, no NICs are due more than the weekly ST, multiply the NICs on the

table by the number of tax weeks in the pro rata

period. This gives the NICs due to date. Deduct any NICs already paid.

This gives the NICs now payable.

Paying NICs on account46 Introduction

As directors have an annual (or pro rata annual)earnings period, NICs will only become due from thedirector and the company when the total earningsexceed the PT and ST respectively.

You can, if you want, pay the directors NICs on accountbefore the total earnings reach the annual (or pro rataannual) PT but you need the directors agreement todo this.

47 Paying the directors and companysNICs on account

If you expect the directors earnings to exceed the PTand the director agrees, you can pay NICs before thetotal earnings exceed the annual (or pro rata annual)PT. Work out the directors and the companys NICs at

the appropriate percentage rates.48 What to do when NICs have been paid

on accountIf NICs have been paid on account as in paragraph 47(see above): pay those NICs to your accounts office in the

normal way do not record the earnings details on the payroll

record until the actual earnings exceed the PT.

49 What to do if earnings do not reachexpected level

If the total earnings do not reach the PT, seeparagraph 65 on page 26.

More than one job50 Introduction

See CWG2(2014) Employer Further Guide to PAYE andNICs for the basic rules if the director: has more than one job with entirely

different employers is both employed and self-employed

wants to know more about refunds of NICs paid inexcess of the prescribed annual maximum

wants to know about deferment of payment ofClass 1 or Class 2 and Class 4 NICs.

This section describes the additional rules for directors.

51 More than one job with thesame company

If the director is also an employee of your company: add all the earnings together work out NICs on the total earnings using the

directors earnings period fill in one payroll record.If the earnings from each job are separately workedout, you do not have to add them together if it is notreasonably practicable to do so. If this is the case: work out the NICs separately use the annual (or pro rata annual) earnings period

for the earnings as a director use the employees earnings period for the earnings

as an employee fill in two payroll records.

For more information go to

www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htm
http://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htmhttp://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htmhttp://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htmhttp://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htm

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52 Companies carrying on businessin association

Companies are considered to be carrying on businessin association with each other if the companies havesome degree of common purpose substantiated bythe sharing of things such as facilities, personnel,accommodation and customers and so on.

If two or more companies are carrying on business inassociation with each other: add all the earnings together work out NICs on the total earnings using the longer,

or longest earnings period, that is, the pro rata orannual earnings period

fill in one payroll record.

But, see paragraph 55 on page 13 if any of the jobs arecontracted-out.

Share the companys NICs due, as agreed between yourselves. If there is no agreement, share them in thesame proportion as the earnings paid by each company.

If the earnings cannot be added together because theearnings are paid through different pay points: work out the NICs separately use the appropriate earnings period for each job fill in separate payroll records for each job.

53 Single service contractsDirectors may be appointed to a group ofcompanies under a single service contract or singleservice agreement.

This usually means that the directors of the parent

company are also directors of one or more of thesubsidiary companies. They are engaged under a singlecontract of service to perform duties for each of thecompanies as requested.

If one payment of earnings is made for all the duties,usually the parent company: pays the NICs fill in one payroll record.

If earnings are paid by more than one of the companies,the companies involved must decide which of them will: add all the earnings together work out NICs on the total earnings using the longer

or longest earnings period, that is, the pro rata orannual earnings period

fills in one payroll record.

But, see paragraph 55 on page 13 if any of the jobs arecontracted-out.

If the earnings cannot be added together because theearnings are paid through different pay points: work out the NICs separately use the appropriate earnings period for each job fill in separate payroll records for each job.

54 One payment of earnings covering morethan one job

Consider first if the companies are carrying on businessin association with each other when a director gets paidby only one company but is a director of: more than one company, or one company and an employee of another company.

If the companies are carrying on business in associationwith each other, the company which pays the earnings: pays the NICs fills in one payroll record.

Go to:

paragraph 55 on page 13 if any of the jobs arecontracted-out

www.hmrc.gov.uk/payerti/employee-starting/ special-situations/multiple-jobs.htm if paymentsare recorded and reported under separate payrollidentities.

If the companies are not carrying on business inassociation with each other: split or apportion the single payment of earnings

into the payment due for each job, and any of the separate payments reach or exceed the

appropriate LEL for the earnings period for that job,record the earnings details. If the payments exceedthe ST, work out NICs on them

fill in a separate payroll record for each job.

At the end of the tax year put: X for the NICs category letter on any payroll record

when the payment for the tax year does not reach

the LEL the appropriate NICs category letter on any other

payroll record.
http://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htmhttp://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htmhttp://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htmhttp://www.hmrc.gov.uk/payerti/employee-starting/special-situations/multiple-jobs.htm

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55 Earnings from contracted-out andnot contracted-out jobs added together

If earnings from more than one job are addedtogether, or apportioned, use the longer or longestearnings period.

The order in which to work out reduced rate NICs isas follows.

First, on earnings on which NICs are payable undercategory letter E if the director belongs to thecompanys Contracted-out Salary Related Scheme.

Then, on earnings on which NICs are payableunder category letter B if the director is in a notcontracted-out employment.

The order in which to work out standard rate NICs isas follows. First, on earnings on which NICs are payable under

category letter D if the director belongs to thecompanys Contracted-out Salary Related scheme.

Then, on earnings on which NICs are payableunder category letter A if the director is in a notcontracted-out employment.

For more information see CWG2(2014) EmployerFurther Guide to PAYE and NICs under Employees withmore than one job.

Example for the 201415 tax year Three companies, Allsorts Ltd, Sortsall Ltd and Rotsalls Ltd carry on business in association with each other.

Mrs Trollass has been:1 a director of Allsorts Ltd, a job with a Contracted-out Salary Related Scheme, since 15 August 1986. She receives

a monthly salary of 3,250 from this job

2 a director of Sortsall Ltd, a not contracted-out job, since 18 May 1989. She receives fees of 2,955 from this jobon 31 March 2015

3 a part-time employee of Rotsalls Ltd, a contracted-out job, same scheme as Allsorts, since 15 August 1986.She receives a monthly salary of 150.

Annual LEL = 5,772 Annual PT = 7,956 Annual ST = 7,956 Annual UAP = 40,040 Annual UEL = 41,865Priority should be given to the total category D earnings of 40,800. Then, to the total category A earnings of2,955 as follows:

NICs categoryletter Earnings Directors NICs Companys NICs

D 5,772 (earnings up to LEL) NIL NIL

2,184 (balance of earningsbetween LEL and PT/ST)

@0%= NIL

@0%= NIL

32,084 (balance of earningsbetween PT/ST and UAP)

@10.6%= 3,400.90

@10.4%= 3,336.74

760 (balance of earningsbetween UAP and UEL)

@12%= 91.20

@13.8%= 104.88

Less rebates on 2,184 @1.4%= 30.58

@3.4%= 74.26

Total category DNICs payable

= 3,461.52 = 3,367.36

A 1,065 (balance of earningsup to UEL)

@12%= 127.80

@13.8%= 146.97

1,890 (earnings over UEL) @2.0%= 37.80

@13.8%= 260.82

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Data item Description79 NI category D A79A Gross earnings for NICs year to date 40,800 2,95579B Gross earnings for NICs pay period 3,500 2,95582 Earnings at the LEL year to date 5,772 082A Earnings at LEL to PT year to date 2,184 083 Earnings from PT to UAP year to date 32,084 084 Earnings from UAP to UEL year to date 760 1,06586A Employer NICs year to date 3,461.52 407.7986Aa Employer NICs this pay period actual actual86B Employee NICs year to date 3,367.36 165.6086Ba Employee NICs this period actual actual84A Directors method of calculation AL/AN

Mrs Trollasss final FPS for the year would show:

56 Professional advisersSome directors have more than one job becausethey are: partners in firms carrying on a profession,

for example accountancy also directors of limited companies providing a service

to that company.

Payments made for the service to the limited companyare not included in the directors earnings if: the nature of the payment satisfies certain tests (see

The tests outlined below), and the nature of the work satisfies certain conditions

(see The conditions outlined below).

The tests To be excluded from the directors earnings, thepayment must be a payment: by a company to, or for the benefit of a director of that

company, and for Class 1, that is, employed-earners, employment of

that director with that company.

The conditions To be excluded from the directors earnings, all theseconditions must be satisfied. The director must also be a partner in a firm carrying

on a profession. Being a director of a company must be a common

practice of membership of that profession and ofthat firm.

Under the terms of the partnership, the director mustaccount to the firm for the payment.

The payment must form an insubstantial part of thegross returns of the firm.

57 HM Revenue & Customs Extra StatutoryConcession (ESC) A37

Alternatively, if we have applied ESC A37 to certainpayments for Income Tax purposes, those paymentscan also be excluded from earnings for the purposes ofassessing the directors Class 1 NICs.

58 Nominee directorsSome directors have more than one job becausethey are nominated to serve on the boards of othercompanies as nominee directors.

Payments made by the companies employing nomineedirectors are not included in directors earnings if: the nature of the payment satisfies certain tests (see

The nature of payment tests below), and one of two sets of conditions are satisfied (see Set of

conditions 1 or Set of conditions 2 on the next page).

In the sets of conditions: Company 1 is the company which makes

the nomination Company 2 is the company to which the director is

appointed as a nominee.

The nature of payment tests To be excluded from the directors earnings for NICspurposes, the payment must be a payment:

by a company to, or for the benefit of a director of that

company, and for Class 1, that is, employed-earners, employment of

that director with that company.

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Is the director also a partner in a firm carryingon a profession?

Is being a director of a company a normal practicefor that profession?

Is being a director of a company a normal practicefor a member of that firm?

Is the director required by the terms of thepartnership to account to the firm for the payment?

Does the payment form an insubstantial part of thegross returns of that firm?

Is payment made by a company?

Is payment made to, or for the benefit of a directorof that company?

Is the payment for employed-earners employmentof the director with that company?

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

No

Disregard payments forClass 1 NICs purposes

Payment cannotbe disregarded

Professional advisers flowchart

Set of conditions 1 All of these conditions must be satisfied.

Company 1 has the right to appoint the director ofCompany 2 because: of its shareholding in Company 2, or

there is an agreement between Companies 1 and 2. The director must account for the payment made byCompany 2 to Company 1.

The payments from Company 2 form part of the profitsof Company 1 and are charged to: Corporation Tax, or Income Tax.

See Nominee directors flowchart 1 on page 16.

Set of conditions 2 All of these conditions must be satisfied. The director was appointed to Company 2

by Company 1. The director is required to account for the payment

made by Company 2 to Company 1.

The payment forms part of the profits of Company 1and is charged to Corporation Tax.

The director has no control over Company 1.

The directors family* have no control overCompany 1.

The director and their family* together have nocontrol over Company 1.

* Family means spouse, civil partner, parent, child,son-in-law or daughter-in-law.

See Nominee directors flowchart 2 on page 16.

59 HM Revenue & Customs Extra StatutoryConcession (ESC) A37

Alternatively, if we have applied ESC A37 to certainpayments for Income Tax purposes, those paymentscan also be excluded from the directors earnings forNICs purposes.

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Nominee directors flowchart 1

Has the company the right to appoint the director byits shareholding in the company making payment?

Has the company theright to appoint thedirector by an agreementwith the companymaking payment?

Is the director required to account for payment tothe company that appointed them?

Does payment form part of profits for Corporation Tax or Income Tax?

Is payment made by a company?

Is payment made to, or for the benefit of a directorof that company?

Is the payment for employed-earners employmentof the director with that company?

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No



Yes

Go toflowchart 2

No

Nominee directors flowchart 2

No

No

No

Was the director appointed to that office by acompany other than the company making payment?

Is the director required to account for payment tothe company that appointed them?

Does payment form part of profits for Corporation Tax or Income Tax?

Has directors family anycontrol over that company?

Yes

Yes

No

Yes



Yes

Has the director any controlover the company whichappointed them?

Yes

No

Yes

Is payment made bya company?

Is payment made to, or forthe benefit of a director ofthat company?

Is the payment for employed-earners employment of thedirector with that company?


No

No


Has the director and theirfamily any control overthat company?

No

Yes

No

Yes

Yes

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Change in category ofcontribution payable60 Introduction

Category of contribution means the NICs category letterunder which NICs are payable.

The category of contribution payable may change

during directors earnings periods if they: reach State Pension age revoke or lose the right to pay reduced rate NICs leave the companys contracted-out Occupational

Pension Scheme, or join the companys contracted-out Occupational

Pension Scheme.If the category of contribution payable changes during adirectors earnings period there are some general ruleswhich must be applied.

Earnings paid before and after the change are addedtogether to work out NICs due.

To ensure that NICs are payable by directors on the totalof their earnings which exceeds the annual (or pro rataannual) PT, the exact percentage method must be usedto work out all the NICs due for the tax year (or pro rataperiod) in which the category of contribution changes.

The order in which to work out NICs is as follows. First, on earnings on which reduced rate NICs are

payable in a contracted-out employment undercategory letter E where the director belongs to thecompanys Contracted-out Salary Related Scheme.

Then, on earnings on which reduced rate NICs arepayable in a not contracted-out employment undercategory letter B.

Then, on earnings on which standard rate NICs arepayable in a contracted-out employment undercategory letter D where the director belongs to thecompanys Contracted-out Salary Related Scheme.

Finally, on earnings on which standard rate NICs arepayable in a not contracted-out employment undercategory letter A.

61 Director reaches State Pension ageIf the director reaches State Pension age during the tax

year or pro rata period: the category of contribution payable will change to

category letter C, not contracted-out the director pays

NICs as normal on earnings paid or due to be paidbefore State Pension age

no NICs on earnings paid or due to be paid on orafter State Pension age

the company pays NICs on earnings paid or due tobe paid before State Pension age at the appropriate

percentage rate(s), either not contracted-out orcontracted-out

on, or after State Pension age, at the notcontracted-out percentage rate.

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Example for the 201415 tax yearMr Roberts was appointed a director of Heltwyll Bay on 1 June 1980. He is 65 on 13 August 2014.

Total earnings for the 201415 tax year = 11,480.

8,480 was paid before 13 August 2014.

He was contracted-out before 13 August 2014 in a Contracted-out Salary Related Scheme.

Annual LEL = 5,772 Annual PT = 7,956 Annual ST = 7,956 Annual UAP = 40,040 Annual UEL = 41,865Priority should be given to the total category D earnings of 8,480. Then, to the total category C earnings of3,000 as follows:

NICs categoryletter

Earnings Directors NICs Companys NICs



@0%= NIL

@0%= NIL

524 (balance of earningsbetween PT/ST and UAP)

@10.6%= 55.54

@10.4%= 54.50

Less rebates on 2,184 @1.4%= 30.58

@3.4%= 74.26

Total category DNICs payable

= 24.96

= R19.76

C 3,000 (balance of earningsbetween PT/ST and UAP)

NIL @13.8%= 414

Data item Description79 NI category D C79A Gross earnings for NICs year to date 8,480 3,00079B Gross earnings for NICs pay period actual82 Earnings at the LEL year to date 5,772 082A Earnings at LEL to PT year to date 184 083 Earnings from PT to UAP year to date 524 084 Earnings from UAP to UEL year to date 0 086A Employer NICs year to date (-19.76) 414.00

86Aa Employer NICs this pay period 0 actual86B Employee NICs year to date 24.96 086Ba Employee NICs this period 0 084A Directors method of calculation AL/AN

Mr Robertss final FPS for the year would show:

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Example for the 201415 tax yearMrs Brown, a director since 12 July 1988, revokes her election on 12 January 2015. She earns 41,865 before thechange and 8,000 afterwards. The employment becomes contracted-out on 12 January 2015 in a Contracted-outSalary Related Scheme.

Annual LEL = 5,772

Annual PT = 7,956 Annual ST = 7,956 Annual UAP = 40,040 Annual UEL = 41,865Priority should be given to the total category B earnings of 41,865 then, to the total category D earnings of8,000 as follows:

NICs categoryletter


B 5,772 (earnings up to LEL) NIL NIL


@0%= NIL

@0%= NIL

32,084 (balance of earningsbetween PT and UAP)

@5.85%= 1,876.91

@13.8%= 4,427.59

1,825 (balance of earningsbetween UAP and UEL)

@5.85%= 106.76

@13.8%= 251.85

D 8,000 (earnings over UEL) @2.0%= 160

@13.8%= 1,104

62 Married womans or widows reduced rateauthority ends

Married women and widows who have the right to payreduced rate NICs, that is, they have a valid certificate ofelection, pay their NICs at the reduced rate on all thoseearnings which exceed the annual (or pro rata annual) PTup to and including the annual (or pro rata annual) UEL, thenat a rate of 2% on those earnings which exceed the UEL. If theauthority to pay reduced rate NICs ends, for example becausethe woman is divorced or she revokes the election, thecategory of contribution payable will change from B, orE to A, or D.If the total earnings paid, both before and after the

change, are less than the annual (or pro rata annual) ST,no NICs are due from the director or the company. If thetotal earnings reach the annual (or pro rata annual) UELbefore the change: the director pays NICs at the reduced percentage rate

on all those earnings which exceed the annual(or pro rata annual) PT up to and including the UEL,then at a rate of 2% on any earnings which exceed

the UEL the company pays NICs at the appropriate notcontracted-out or contracted-out percentage rate(s)on all those earnings which exceed the annual(or pro rata annual) ST.

Data item Description

79 NI category B79A Gross earnings for NICs year to date 50,47579B Gross earnings for NICs pay period actual82 Earnings at the LEL year to date 5,77282A Earnings at LEL to PT year to date 2,18483 Earnings PT to UAP year to date 32,08484 Earnings UAP to UEL year to date 1,82586A Employer NICs year to date 5,783.4486Aa Employer NICs this pay period actual86B Employee NICs year to date 2,143.67

86Ba Employee NICs this period actual84A Directors method of calculation AL/AN

Mrs Browns final FPS for the year would show:

The NICs under category letter D are included in the contributions under category letter B. A separate category letter D entry is not required. Where, after recalculation, a category letter is no longer needed,any previously reported year to date figures should be zeroed out.

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If the total earnings exceed the annual (or pro rataannual) PT before the change, but they do not reach theUEL, the director pays NICs at the: reduced percentage rate on those earnings which

exceed the annual (or pro rata annual) PT paid or dueto be paid before the change

standard percentage rate, not contracted-out orcontracted-out as appropriate, on the balance of

earnings up to and including the annual (or pro rataannual) UAP and from the annual (or pro rata annual)UAP up to and including the annual (or pro rataannual) UEL

rate of 2% on any earnings which exceed the UEL.

The company pays NICs at the appropriate notcontracted-out or contracted-out percentage rate(s) onall those earnings which exceed the annual (or pro rata

annual) ST paid before and after the change.

If the total earnings are less than the annual (or pro rataannual) PT before the change, but the total earningsfor the tax year or pro rata period exceed the PT, thedirector pays NICs at the standard percentage rate, notcontracted-out or contracted-out as appropriate, onthose earnings which exceed the annual (or pro rataannual) PT up to and including the annual (or pro rata

annual) UAP and from the annual (or pro rata annual)UAP up to and including the annual (or pro rata annual)UEL, then at a rate of 2% on any earnings which exceedthe UEL.

The company pays NICs at the appropriate notcontracted-out or contracted-out percentage rate(s) onall those earnings which exceed the annual (or pro rataannual) ST.

Example for the 201415 tax yearMrs Crosss marriage ends in divorce on 8 January 2015.

The employment is contracted-out in a Contracted-Out Salary Related Scheme.

She earns 41,450 in the 201415 tax year,

41,000 paid before 8 January 2015.

Annual LEL = 5,772 Annual PT = 7,956 Annual ST = 7,956 Annual UAP = 40,040 Annual UEL = 41,865Priority should be given to the total category E earnings of 41,000. Then, to the total category D earnings of450 as follows:

NICs categoryletter


E 5,772 (earnings up to LEL) NIL NIL


@0%= NIL

@0%= NIL


@5.85%= 1,876.91

@10.4%= 3,336.74


@5.85%= 56.16

@13.8%= 132.48

Less employer only rebateon 2,184

@3.4%=74.26

Total category ENICs payable

= 1,933.07

= 3,394.96

D 450 (balance of earningsbetween UAP and UEL)

@12%= 54

@13.8%= 62.10

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Data item Description79 NI category D79A Gross earnings for NICs year to date 27,47879B Gross earnings for NICs pay period actual82 Earnings at the LEL year to date 5,77282A Earnings at LEL to PT year to date 2,83283 Earnings PT to UAP year to date 2,18484 Earnings UAP to UEL year to date 19,52286A Employer NICs Year to date 1,956.0386Aa Employer NICs this pay period actual86B Employee NICs year to date 2,038.7586Ba Employee NICs this period actual84A Directors method of calculation AL/AN

Mrs Daviess final FPS for the year would show:

63 Joining or leaving a contracted-outpension scheme

The rules you must apply are exactly the same if thedirectors category of contribution payable changesfrom: contracted-out to not contracted-out, that is,

from D to A not contracted-out to contracted-out, that is,

from A to D.

If the total earnings paid both before and after thechange are less than the annual (or pro rata annual) PT

and ST, no NICs are payable by the director orthe company.

The contracted-out earnings take priority over the notcontracted-out earnings.

If the earnings from the contracted-out employmentreach or exceed the annual (or pro rata annual) UEL the

director pays NICs at the appropriate contracted-outpercentage rate on those earnings which exceed theannual (or pro rata annual) PT up to and including theannual (or pro rata annual) UAP then at the appropriatenot contracted-out percentage rate on those earningswhich exceed the annual (or pro rata annual) UAP up toand including the annual (or pro rata annual) UEL thenat a rate of 2% on any earnings which exceed the UEL.

The company pays NICs at the: appropriate contracted-out percentage rate on all

those earnings which exceed the annual (or pro rataannual) ST up to and including the annual (or pro rataannual) UAP

appropriate not contracted-out percentage rate onthe remainder of the total earnings.

Where, after recalculation, a category letter is no longer needed,any previously reported year to date figures should be zeroed out.

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Data item Description79 NI category D79A Gross earnings for NICs year to date 44,32979B Gross earnings for NICs pay period actual82 Earnings at the LEL year to date 5,21782A Earnings at LEL to PT year to date 1,1974

83 Earnings PT to UAP year to date 28,99984 Earnings UAP to UEL year to date 19886A Employer NICs year to date 4,071.9686Aa Employer NICs this pay period actual86B Employee NICs year to date 3,374.0386Ba Employee NICs this period actual84A Directors method of calculation AL/AN

Mr Evanss final FPS for the year would show:

The NICs under category letter A are included in the contributions under category letter D. A separate category letter A entry is not required. Where, after recalculation, a category letter is no longer needed, anypreviously reported year to date figures should be zeroed out.

Example for the 201415 tax yearMr Evans is appointed a director of A N Other and Company Limited on 12 May 2014.

He joins the companys Contracted-out Salary Related Scheme on 4 August 2014.Earnings paid before the change are 6,479 and earnings paid after the change 37,850.

Pro rata annual LEL = 5,217Pro rata annual PT = 7,191Pro rata annual ST = 7,191

Pro rata annual UAP = 36,190Pro rata annual UEL = 37,840Priority should be given to the total category D earnings of 37,850. Then, to the total category A earnings of6,479 as follows:

NICs categoryletter




@0%= NIL

@0%= NIL


@10.6%= 3,073.89

@10.4%= 3,015.90

1,650 (balance of earningsbetween UAP and UEL)

@12%= 198

@13.8%= 227.70

Less rebateson 1,974

@1.4%= 27.64

@3.4%=67.12

Category D NICs payable onearnings up to UEL

= 3,244.25 = 3,176.48

(10 earnings over UEL to be included with category A earnings)

A 6,489(earnings over UEL, including10 category D earnings)

@2%= 129.78

@13.8%= 895.48

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Example for the 201415 tax yearMr Francis, a director of Spratts Fat Ltd since 6 April 1975, leaves his companys Contracted-Out Salary Relatedpension scheme in 201415.

Earnings paid before the change are 1,884 and earnings paid after the change are 15,806.

Annual LEL = 5,772 Annual PT = 7,956 Annual ST = 7,956 Annual UAP = 40,040 Annual UEL = 41,865Priority should be given to the total category D earnings of 1,884 then, to the total category A earnings of15,806 as follows:

NICs categoryletter



A 3,888 (balance of earningsup to LEL) NIL NIL


@0%= NIL

@0%= NIL

9,734 (balance of earningsbetween PT and UAP)

@12%= 1,168.08

@13.8%= 1,343.29

If the earnings from the contracted-out employmentare less than the annual (or pro rata annual) ST but thetotal earnings exceed the ST: the director pays NICs at the appropriate not

contracted-out percentage rate on those earningswhich exceed the annual (or pro rata annual) PT upto and including the UEL, then at a rate of 2% on anyearnings which exceed the UEL

the company pays NICs at the appropriate notcontracted-out percentage rate on those earningswhich exceed the annual (or pro rata annual) ST.

If the earnings from the contracted-out employmentare less than the annual (or pro rata annual) PT but thetotal earnings exceed the PT: the director pays NICs at the appropriate not

contracted-out percentage rate on those earningswhich exceed the annual (or pro rata annual) PT upto and including the UEL, then at a rate of 2% on anyearnings which exceed the UEL

the company pays NICs at the appropriatecontracted-out percentage rate on those earningswhich exceed the annual (or pro rata annual) ST, up toand including the annual (or pro rata annual) PT, thenat the appropriate not contracted-out percentage rateon those earnings which exceed the annual(or pro rata annual) PT.

Data item Description

79 NI category A79A Gross earnings for NICs year to date 17,69079B Gross earnings for NICs pay period actual82 Earnings at the LEL year to date 5,77282A Earnings at LEL to PT year to date 2,18483 Earnings PT to UAP year to date 9,73484 Earnings UAP to UEL year to date 086A Employer NICs year to date 1,343.2986Aa Employer NICs this pay period actual86B Employee NICs year to date 1,168.08

86Ba Employee NICs this period actual84A Directors method of calculation AL/AN

Mr Franciss final FPS for the year would show:

The NICs under category letter D are included in the contributions under category letter A. A separate category letter D entry is not required. Where, after recalculation, a category letter is no longerneeded, any previously reported year to date figures should be zeroed out.

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CA44 25

Example for the 201415 tax yearMr Griffiths, a director of CHIPS plc since 30 November 1990, joins his companys Contracted-out Salary Relatedpension scheme on 2 May 2014. Earnings paid before the change are 315 and earnings paid after the change are40,635. He resigns on 1 October 2014 but is reappointed on 1 December 2014 and gets a bonus of 500 but hedoes not rejoin the companys contracted-out pension scheme.

Annual LEL = 5,772 Annual PT = 7,956 Annual ST= 7,956 Annual UAP = 40,040 Annual UEL = 41,865Priority should be given to the total category D earnings of 40,635. Then, to the total category A earnings of815 as follows:

NICs categoryletter




@0%= NIL

@0%= NIL


@10.6%= 3,400.90

@10.4%= 3,336.74


@12%= 71.40

@13.8%= 82.11

Less rebateson 2,184

@1.4%= 30.58

@3.4%= 74.26

Total category D NICs payable = 3,441.72 = 3,344.59

A 815 (balance of earningsbetween UAP and UEL)

@12%= 97.80

@13.8%= 112.47

If the earnings from the contracted-out employmentare between the annual (or pro rata annual) PT and theUAP the director pays NICs at the: appropriate contracted-out percentage rate on those

contracted-out earnings which exceed the annual(or pro rata annual) PT, and

appropriate not contracted-out percentage rateon the not contracted-out earnings until the total

earnings reach the UEL, then rate of 2% on any earnings which exceed the UEL.

The company pays NICs at the: appropriate contracted-out percentage rate on those

contracted-out earnings which exceed the annual(or pro rata annual) ST, and

appropriate not contracted-out percentage rate onthe not contracted-out earnings.

If the earnings from the contracted-out employment arebetween the annual (or pro rata annual) UAP and theUEL the director pays NICs at the: appropriate contracted-out percentage rate on those

contracted-out earnings between the annual (or prorata annual) PT and the annual (or pro rata annual)UAP, and

appropriate not contracted-out percentage rate onthose contracted-out earnings which exceed theannual (or pro rata annual) UAP, and

appropriate not contracted-out percentage rateon the not contracted-out earnings until the total

earnings reach the UEL, then rate of 2% on any earnings which exceed the UEL. The company pays NICs at the: appropriate contracted-out percentage rate on those

contracted-out earnings between the annual(or pro rata annual) ST and the annual (or pro rataannual) UAP, and

appropriate not contracted-out percentage rate onthose contracted-out earnings which exceed theannual (or pro rata annual) UAP, and

appropriate not contracted-out percentage rate onthe not contracted-out earnings.

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Data item Description79 NI category D A79A Gross earnings for NICs year to date 40,635 81579B Gross earnings for NICs pay period 0 actual82 Earnings at the LEL year to date 5,772 082A Earnings at LEL to PT year to date 2,184 083 Earnings from PT to UAP year to date 32,084 084 Earnings from UAP to UEL year to date 595 81586A Employer NICs year to date 3,344.59 112.4786Aa Employer NICs this pay period 0 actual86B Employee NICs year to date 3,441.72 97.8086Ba Employee NICs this period 0 actual84A Directors method of calculation AL/AN

Mr Griffithss final FPS for the year would show:

Recording NICs information64 Introduction

The normal rules about recording NICs information canbe found:

at www.hmrc.gov.uk/payerti in the CWG2(2014) Employer Further Guide to PAYE

and NICs .

65 If you have paid NICs before earningsexceed Primary Threshold

If NICs are paid on account before the total earningsexceed the annual (or pro rata annual) PT: record the NICs paid on the payroll record

do not record the earnings details on thepayroll record.

When the total earnings exceed the annual (or pro rataannual) PT, record the earnings details on thepayroll record.

If you adjust the NICs later because the earnings do notexceed the annual (or pro rata annual) PT: amend the final entry on the payroll record adjust the final payment to your accounts office refund the NICs paid to the director.

66 Paying NICs at the time they are due You can use one of two methods to record directorsNICs information on the payroll record.

Payment-by-payment methodIf you use the payment-by-payment method to recordNICs information, record on the payroll record: the actual NICs due each time a payment of earnings

is made the actual earnings details as appropriate, each time a

payment of earnings is made all other NICs information.

In a contracted-out employment, depending on the

level of the directors earnings and the NICs rebatesdue, it is possible for the amount of the companys NICsto be a negative figure. Under this particular method,

if a further payment of earnings is subsequentlymade, adjust the companys NICs figure to reflect theactual amount now due after taking into account anypreviously over-recovered rebate.

At the end of the tax year: add up the figures on the payroll record as normal record the totals.

Cumulative methodIf you use the cumulative method to record NICsinformation, record on the payroll record: the cumulative NICs due each time a payment of

earnings is made the cumulative earnings as appropriate, each time a

payment of earnings is made all other cumulative NICs information. At the end of

the tax year record the cumulative totals.

Cumulative records can easily be converted to apayment-by-payment record by deducting the previousNICs information from the current NICs information.

67 Earnings added together or change inthe category of contribution payable

The examples in this booklet show how to record theearnings details. See Change in category of contributionpayable, paragraph 60 on page 17.

Remember to record the other NICs and tax informationon your payroll records.

68 If you use a computerisedpayroll system

Please make sure the total earnings have beenaccumulated in the appropriate data areas.

If you use the cumulative method to record NICsinformation your system must be capable of: holding all the cumulative data producing printouts giving the NICs information on a

payment-by-payment basis.

The examples in this booklet show how to record theearnings details. See Change in category of contributionpayable, paragraph 60 on page 17 onwards.

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CA44 27

PAYE Online for Employers69 Do it online

Using the PAYE online service is a simple, secure, fastand convenient way of exchanging information with us.It saves you time, cuts down on errors and can help youto reduce your administration and storage costs. Whenusing the online service, you will be able to see your

PAYE tax position, including Class 1 NICs payments andoutstanding amounts for 201011 and later tax years.

You will also receive information such as employee taxcodes quicker benefiting both you and your employees.

How to send and receive information online There are various methods to choose from. You can use: a bookkeeper, agent or payroll bureau to file

online on your behalf using our PAYE Online for Agents service

our free PAYE Online for Employers Internet service Electronic Data Interchange (EDI). This is suitable

for large employers who typically have employeenumbers in the thousands or very high staff turnover.

For more information go to www.hmrc.gov.uk/payerti/ reporting/how-to-report.htm

Forms and returns you need to send online Almost all employers must report their payrollinformation online using a Full Payment Submission(FPS) for each pay period. There are however, a smallnumber of employers who may be:

exempt from submitting this information online unable due to exceptional circumstances to submit

information online. There are very few exceptions. For more informationabout the exceptions go to www.hmrc.gov.uk/payerti/ reporting/paper-filing.htm#1

How to register for online servicesIf you have not yet registered for online filing, theregistration process will only take you a matter ofminutes. But you will need to wait for an ActivationCode before you can start using the service. We willsend you this by post within seven days of registration.

For more information about online filing, registration

and the deadlines you need to meet, go towww.hmrc.gov.uk/payerti/getting-started/using-paye-online.htm
http://www.hmrc.gov.uk/payerti/reporting/how-to-report.htmhttp://www.hmrc.gov.uk/payerti/reporting/how-to-report.htmhttp://www.hmrc.gov.uk/payerti/reporting/paper-filing.htm#1http://www.hmrc.gov.uk/payerti/reporting/paper-filing.htm#1http://www.hmrc.gov.uk/payerti/getting-started/using-paye-online.htmhttp://www.hmrc.gov.uk/payerti/getting-started/using-paye-online.htmhttp://www.hmrc.gov.uk/payerti/getting-started/using-paye-online.htmhttp://www.hmrc.gov.uk/payerti/getting-started/%20using-paye-online.htmhttp://www.hmrc.gov.uk/payerti/getting-started/%20using-paye-online.htmhttp://www.hmrc.gov.uk/payerti/reporting/paper-filing.htm#1http://www.hmrc.gov.uk/payerti/reporting/paper-filing.htm#1http://www.hmrc.gov.uk/payerti/reporting/how-to-report.htmhttp://www.hmrc.gov.uk/payerti/reporting/how-to-report.htm

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Special circumstances70 Directors who go to work abroad or

come to work in the UK This section provides brief guidelines about Class 1 NICsfor directors living and/or working abroad.

There are different rules if the director goes to work in,or comes to work in the UK from: a European Economic Area (EEA) country or a country

with which the UK has a reciprocal agreement withsocial security, or

a country that is outside the EEA and with which theUK does not have a reciprocal agreement onsocial security.

European Economic Area countries Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

IcelandItaly

Latvia

Liechtenstein

Lithuania

Luxembourg

Malta

Netherlands

Norway

Poland

Portugal

Republic of Ireland

Romania

Slovakia

Slovenia

Spain

Sweden

Switzerland*

United Kingdom, including Gibraltar but not the

Channel Islands or the Isle of Man.*From 1 April 2012 EC Regulation 883/2004 wasextended to cover Switzerland. HMRC now treatsSwitzerland as being another EU member state forsocial security purposes.

Countries with which the UK has a reciprocalagreement on social securityBarbados

Bermuda

Canada*

Israel

Jamaica

Japan**Jersey and Guernsey

Korea**

Mauritius

New Zealand

Philippines

Turkey

USA

Bosnia-Herzegovina, Macedonia, Serbia, Montenegroand Kosovo

*The Double Contributions Convention for Canada alsocovers benefit provisions.

**The Double Contributions Conventions for Japan andthe Republic of Korea only cover social security liabilityand do not cover benefits.

The table on page 29 shows when a director may beliable to pay UK NICs when: coming to the UK to work, or going to work abroad.

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CA44 29

Director

goes toworkabroad

in an EEA country,or a country with

which the UKhas a reciprocalagreement onsocial security

The general rule is that a director will pay contributionsto the social security scheme of the country in whichthey are working. But, there are certain exceptions tothis rule that mean the director could remain liable topay UK NICs during the period of employment abroad.

For moreinformation go towww.hmrc.gov.uk/international/ ni-abroad.htm

in a countryoutside the EEA,and

with which theUKdoes not have a reciprocalagreement onsocial security

If: the employer has a place of business in the UK the director is ordinarily resident in the UK, and immediately before the start of the employment

abroad the director was resident in the UKthe director will be liable for UK NICs for the first52 weeks of the employment abroad.

Directorcomes towork in

the UK

from an EEAcountry, or

from a countrywith which the UKhas a reciprocalagreement onsocial security

The general rule is that a director will be liable to pay

UK NICs unless they hold a Certificate of coverage . Thisis issued by the social security authority in the countryfrom which the director has come. The Certificate ofcoverage will exempt the director from having to payUK NICs.

However, under certain circumstances, where thedirector has arrived from a country with which the UKhas a reciprocal agreement on social security, they maybe exempt from paying UK NICs even if they dont havea Certificate of coverage from the other country. See thetable headed Special concession below.

For moreinformation go towww.hmrc.gov.uk/nic/work/ emps-abroad.htm or phone ourEmployer Helplineon0300 200 3200

from a countryoutside the EEA,and

with which theUKdoes not have a Reciprocal

Agreement onsocial security

If: the employer is based in a country outside the EEA

or with which the UK does not have a reciprocalagreement on social security, and

the director is ordinarily neither resident noremployed in the UK

the director will not be liable for UK NICs for the first52 weeks of their employment in the UK.

Specialconcession

Director, who is

neither resident orordinarily resident inthe UK: comes to work for

a company inthe UK

from a countryoutside the EEA,and

the only work thedirector does inthe UK is to attendboard meetings

We will not seek payment of UK NICs if: they attend no more than ten board meetings in a tax year and each visit to the UK during which a boardmeeting takes place lasts no more than two nights, or

there is only one board meeting in a tax year and thevisit to the UK during which that board meeting takesplace lasts no more than two weeks.

This is not an example. If the directors attendance forboard meetings does not fit the criteria above, thespecial concession will not apply.

This concession does not apply to a director who comesto work in the UK from an EEA country.

For moreinformationgo towww.hmrc.gov.uk/nic/work/ emps-abroad.htm or phone ourEmployerHelpline on 0300 200 3200
http://www.hmrc.gov.uk/international/ni-abroad.htmhttp://www.hmrc.gov.uk/international/ni-abroad.htmhttp://www.hmrc.gov.uk/international/ni-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abroad.htmhttp://www.hmrc.gov.uk/nic/work/emps-abro

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