National insurance checks

If you get your NIC calculations wrong, HMRC is unlikely to correct the figures, as it doesn’t reconcile NIC records at the taxpayer level as is done for income tax. There are three NIC issues you should check.

Directors

Unlike normal employees, directors are treated as having an annual pay period for NIC purposes. Only individuals who serve on the board of the company are directors for this purpose. Employees who are given the title of “director”, but who have no controlling say in running the company should not be treated as directors for NIC purposes.

Pension age

Employees are not liable to pay primary class 1 NIC once they have reached state pension age (SPA), but secondary (employers) class 1 NIC is payable on their salary beyond that point. In November 2018 the SPA was equalised at 65 for men and women, but the SPA continues to rise according to the individual’s date of birth. The employer needs to be aware of exactly when each employee will reach SPA, and record that information in the payroll software.

Deferral of class 1

It is still possible to defer payment of class 1 NIC where an employee has more than one employment and earns in excess of the upper earnings limit (£50,000 for 2019/20) in at least one of those employments. The individual needs to apply to defer class 1 NIC either online or using the paper form CA72A, preferably before the start of the tax year, but by 14 February within the tax year at the very latest.

Written by the Tax Advice Network