National Insurance Contributions (NICs) Payable in 2024/25 Explained
Understanding National Insurance Contributions (NICs)
In the UK, National Insurance Contributions (NICs) are mandatory for both employees and employers on earnings and certain benefits. The calculation of NICs depends on the nature of the payment and the specific rules governing salaries and benefits in kind.
This article examines the NICs liability for Mr. A, Mr. T, and Adam Accountancy Ltd for the tax year 2024/25.
Case Study: NICs Assessment for Employees and Employers
Example Scenario
- Mr. A: Aged 52, earning a salary of £70,000, with Bupa insurance worth £2,650 provided by his employer.
- Mr. T: Aged 20, earning a salary of £25,000, with a work-related training course valued at £1,750 paid by his employer.
We will assess their NICs obligations for both employees and employers.
Employee National Insurance Contributions Liability
Mr. A’s NICs Liability
Since Mr. A is below the UK state pension age (66), he must pay Class 1 primary NICs on his salary but not on his benefit in kind.
- The Primary Threshold (PT) for NICs is £12,570 per year, meaning income above this amount is subject to NICs.
- The Upper Earnings Limit (UEL) is £50,270 per year. The NICs rates are:
- 12% on earnings between £12,570 and £50,270
- 2% on earnings above £50,270
NICs Calculation for Mr. A:
- Taxable salary for NICs: £70,000 – £12,570 = £57,430
- NICs breakdown:
- £37,700 * 12% = £4,524 (£50,270 – £12,570)
- £19,730 * 2% = £394.60 (£70,000 – £50,270)
Total NICs payable by Mr. A: £4,918.60
Note: The Bupa insurance benefit is not subject to Class 1 NICs for the employee.
Mr. T’s NICs Liability
- Annual salary: £25,000
- Personal Allowance threshold: £12,570
- Taxable salary for NICs: £25,000 – £12,570 = £12,430
- Since Mr. T’s earnings do not exceed the PT (£12,570), no NICs are payable by him.
- The work-related training course is exempt from NICs.
Total NICs payable by Mr. T: £0
Employer National Insurance Contributions Liability
Employers must pay Class 1 Secondary NICs on employee salaries above the secondary threshold (£9,100) at 13.8%, and Class 1A NICs on taxable benefits at the same rate.
Employer NICs for Mr. A:
- Salary NICs: (£70,000 – £9,100) * 13.8% = £8,404.20
- Bupa Benefit NICs: £2,650 * 13.8% = £365.70
Total Employer NICs for Mr. A: £8,769.90
Employer NICs for Mr. T:
- Salary NICs: (£25,000 – £9,100) * 13.8% = £2,194.20
- Work-related training: Exempt from NICs
Total Employer NICs for Mr. T: £2,194.20
Conclusion
For the 2024/25 tax year, NICs remain an essential part of employment taxation in the UK. Employees contribute based on their salary levels, while employer National Insurance Contributions bear additional NICs liabilities on both salaries and taxable benefits. Understanding these calculations is crucial for compliance and financial planning.
Employers should ensure correct NICs deductions to avoid penalties, while employees should be aware of how NICs impact their take-home pay. If you need further guidance, consult a tax specialist.
If you would like further assistance with this or anything else, please get in touch, contact us for expert assistance.
