National Insurance on Earned Income

National Insurance Contributions (NICs) are payable on employment income (further to Class 1) and self employment income (further to Class 2 and Class 4). Contributions are paid in order to gain entitlements to ‘State Benefits’, including the State Pension and the National Health Service (NHS).

If you are a professional Contractor and you are interested in either working with an Umbrella Company or setting up your own Contractor Limited Company Commonwealth Contractors can help!

To find out more about Commonwealth Contractors solutions for professional Contractors call now on 0800 294 4388 or Submit your Details and we will get right back to you!

National Insurance Contributions on Employment Income (PAYE)

If you are employed by a company under the Pay as You Earn (PAYE) Scheme your employer will need to;

  • Deduct Class 1 ‘Employees’ National Insurance from your pay, AND
  • Pay Class 1 ‘Employers’ National Insurance on top of any salary payments

Please note that if you are a professional Contractor you are ultimately required to pay Employers National Insurance from your hourly or daily billing rate.

Class 1 Employees National Insurance

The following table outlines the Class 1 Employees NI rates and bands.

£ per week

2012 / 2013

2013 / 2014

2014 / 2015

2015/16

Primary Threshold £146 £149 £153  £155
Upper Earnings Limit £817 £797 £805  £815
Standard Employees NI Rate(between Primary Threshold & Upper Earnings Limited) 12% 12% 12%  12%
Higher Employees NI Rate(above Upper Earnings Limit) 2% 2% 2%  2%

Class 1 Employers National Insurance

The following table outlines the Class 1 Employers NI rates and bands.

£ per week

2012 / 2013

2013 / 2014

2014 / 2015

2015/16

Secondary Threshold £144 £148 £153 £156
Employers Secondary Class 1 Rate(Above Secondary Threshold) 13.8% 13.8% 13.8% 13.8%

An Umbrella Company is a ‘ready-made’ payment vehicle that deals with UK contract earnings. Invoices are raised, expenses are processed, and net payments are made all in return for a margin of gross billings.

The margin an Umbrella Company receives either ‘includes’ or ‘excludes’ Employers National Insurance. Don’t be fooled by Umbrella Companies who offer low margins but exclude Employers National Insurance as you will still have to pay Employers National Insurance from the daily or hourly billing rate.

National Insurance Contributions on Self Employed Income

If you receive self employed earnings such as partnership profits you need to pay Class 2 and Class 4 National Insurance Contributions.

£ per week

2012 / 2013

2013 / 2014

2014 / 2015

2015/16

Class 2 Rate £2.65 £2.70 £2.75 £2.80
Class 4 Lower Profits Limit £7,605 pa £7,755 pa £7,956 pa £8,060
Class 4 Upper Profits Limit £42,475 pa £41,450 pa £41,865 pa £42,385
Class 4 Rate (Between Lower & Upper Profits Limit) 9% 9% 9% 9%
Class 4 Rate(Above Upper Profits Limit) 2% 2% 2% 2%

Find out More

To find out more about Commonwealth Contractors call now on 0800 294 4388 or Submit your Details and we will get right back to you!

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