National Insurance

National Insurance (NI) is a compulsory levy charged on an employee's earnings. It is a substantial source for both government revenue and expenditure.

There are several classes and levels of contributions, each related to the status of the employee.

Employer and employee year-to-date National Insurance contributions (NICs) are accumulated separately for each table code, for the current payroll period and the year to date. When employees change codes during the year a new amount is accumulated for the new code. You can see the old and new amounts when you produce the year-end P14 and P60 forms.

Gross pay on which National Insurance is calculated is also held separately for each table letter (known as NI gross). National Insurance gross earnings and contributions at contracted out rates are held separately.

Special rounding rules apply for NI contributions (NICs), NI rebates, minimum payments into a Contracted Out Money Purchase pension scheme (COMPS) and for Class 1A NICs. The law requires that £0.005 or less is disregarded – only the third decimal place is looked at when calculating NICs due where such calculation results in more than two decimal places. If the third decimal place, regardless of subsequent decimal places, is

• 5 or less, the amount is rounded down.
• 6 or more, the amount is rounded up.

For example, a calculated NIC of £67.5558 results in the NIC payable being £67.55; a calculated NIC of £67.5568 results in the NIC payable being £67.56.

Click on one of the following for more information about National Insurance within Payroll Management:

• Class 1A Contributions
• National Insurance Numbers
• National Insurance Rebates
• National Insurance Tables
• Relevant Pay Items

Relevant Pay Items