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:

Relevant Pay Items

The following tables show which pay items should be included to correctly calculate National Insurance contributions for either a Directors or a normal payroll:
Normal Payroll Directors Payroll
ni dni
niable niable
nigross dnigross
nigrosstd dnigstd
nigrossred dnigred
nicont std dnicontstd
nicont red dnicontred
nicont adj dnicontadj
niemp dniemp
niemployer dniemployr
niemp adj dniempadj
nirebate dniempstd
eerebate dniempred
rebrepaid dnirebate
  deerebate
  drebrepaid