From 6 April 2015 employer’s will no longer have to pay class 1 secondary national insurance contributions (NIC) for employees under 21, whose earnings are below the upper secondary threshold.
Under the current regime class 1 secondary NICs are due, from the employer, on payments made to employees in excess of the secondary threshold at the applicable percentage (for the tax year in question). The secondary threshold for 2015-16 is £156 per week, or £676 per month, and the employer’s NIC rate is 13.8%. So, for example, if an employee earns £1,200 per month in 2015-16, then the employer’s class 1 secondary NICs due on this salary is approximately £72.31 per month, or £867.72 per year. For those employees aged 21 and over, this will still be due.
For those employees who are under 21 and lucky enough to earn in excess of the upper secondary threshold (UST), then employer’s NICs will be due on those earnings in excess of the UST at the applicable rate. The UST for 2015-16 is £815 per week.
This new ruling does not apply to class 1 primary national insurance contributions, that are due from the employee. So, for those employees who are over 16 and who earn in excess of the primary threshold, employee’s class 1 NICs will still be payable at the applicable rate.
Also, the zero rate won’t apply to class 1A NICs, which are due on any benefit you provide to your employees by reason of their employment.
Should you require any further guidance please contact your payroll provider or Green & Co Accountants.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.