Employee NIC Calculator (Guide)

Who is an employee?

HMRC definition of an employee is someone who works under an employment contract.

A person may be an employee in employment law but have a different status for tax purposes. It is the responsibility of an employer to determine each worker's position in the employment and tax laws.

What are National insurance contributions?

National Insurance is a government scheme requiring UK residents and workers to make regular payments.

Employees and businesses pay National Insurance Contributions (NICs) to fund the NHS and government benefits schemes such as state pensions.

Your employment status and income determine the type of NIC you pay or whether or not there are any gaps in your National Insurance coverage.

For the tax year 2024-25: You must pay National Insurance if you are over 16 years old and either an employee earning more than £12,570 per year or self-employed and make a profit of £12,570 or more per year.

What are employee National Insurance contributions?

Employee NI contributions are deducted as taxation from each payslip at a percentage rate. It could also include some employee costs and benefits paid by your company. Their income determines the amount deducted from a person's wages.

How to calculate NIC for employees

It can be challenging to understand how NICs operate, especially if you're new to the employment market. Understanding how it works will help you with the budget and determine whether you have paid the correct amount.

The best part is that you will require none of these computations or calculations. Your employer will do these calculations, deduct the amount from your gross salary, and pay it to the HMRC.

You must pay National Insurance whether you are working or self-employed. You are only exempt from paying NI under certain conditions.

Should you pay National Insurance for any in-kind benefits?

Employees usually do not pay Class 1 NIC on taxable benefits and expenses, though there are exceptions.

While you may be required to pay income tax on any benefit, you are exempt from paying Class 1 NIC on the cash equivalent of your employer's low-interest or interest-free loan (a 'beneficial loan').

Your employer may be legally required to pay Class 1A NIC on the taxable benefit if the loan is beneficial. If your employer waives the loan, they will deduct Class 1 NIC and income tax from your other wages through payroll.

On GOV.UK's A to Z list of expenses and benefits, you may search up the tax and NIC treatment of any benefits your firm offers you. Although it is aimed at businesses, it will also help employees.

How can I register for a National Insurance number?

Every UK citizen will receive their National Insurance number at the age of 16. An employee's number will be written on all payslips, P45s, and P60s they get.

If you lose your NI number, you can seek a replacement on the gov.uk website. It should appear within 15 working days of your application being completed.

You can apply for an NI number if you live in the UK and have the legal right to work. It is entirely free to apply for a National Insurance number.

If you are a non-citizen, you can start working in the UK by proving your work eligibility.

What happens if I work multiple jobs?

You may be required to pay National Insurance contributions (NICs) on your second income and pay taxes. As opposed to income tax, national insurance works differently. Each individual has a single tax-free sum available each year. As long as the work is with a different employer, each job has its own National Insurance limit. The weekly limit (2024/25) is £242.

And unless you're a corporate director, each job you hold for NIC purposes is usually examined separately. It signifies that each employee has reached the lower threshold, yet you can still pay National Insurance Contributions on each work.

Tell your supervisor if you're not sure whether your jobs are related. You can ask to defer payment of National Insurance Contribution in the other job if you have two positions in the 2024/25 tax year and plan to pay Class 1 National Insurance on a weekly income of at least £967 in one of them for the entire tax year. In one of the jobs, you must expect to pay Class 1 NIC at least £4,189 in monthly wages during the tax year.

You can fill out form CA72A to seek a Class 1 NIC delay. If you require advice notes, you can obtain them from the GOV.UK page.

HMRC will collect your Class 1 NIC every payday period, but they will not collect your Class 2 NIC until 31 January following the end of the tax year. In your payments on account and balancing payment, you pay your Class 4 NIC and your income tax due.

An annual maximum of contributions is payable when someone is employed and self-employed. As a result, if you have paid enough Class 1 NICs, you may not need to pay full Class 2/Class 4 NICs.

HMRC will automatically compute Class 2 and Class 4 NIC amounts when you submit your Self Assessment tax return, considering the maximum amounts due.