A Guide to National Insurance for Employers

  • Price: £3.60
  • Published: March 2017
  • Type: Business Information Factsheet
  • Format: PDF

National Insurance (NI) is a system of compulsory contributions paid by employers and employed people (including company directors) and self-employed people.

Employed and self-employed individuals are liable for different types (or classes) of National Insurance Contributions (NICs), which qualify them for different types of state benefits such as the State Pension, Jobseeker's Allowance and Incapacity Benefit.

Subject to certain exceptions, most employees are liable for deduction of Class 1 Primary contributions from their earnings, and employers with employees who are liable for Class 1 NICs are required to pay Class 1 Secondary contributions. Employers' contributions are calculated and charged on the amount of their employees' pay and on any benefits in kind employees receive, such as company cars.

Some individuals (whether employed or self employed) also choose to pay voluntary Class 3 NICs, for example to protect their State Pension if they have not otherwise made sufficient contributions.

This factsheet provides a guide to employers' and employees' National Insurance (NI) and explains the NI process, how employees' NICs are calculated, which employees are exempt from paying NICs and how to assess the NICs due. It also covers how directors' NI is calculated, and explains employers' NICs, voluntary NI payments, the process for reclaiming over-payments of NI, and the NI Employment Allowance that employers can claim.

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