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You can only make National Insurance deductions on earnings above the Lower Earnings Limit (LEL).
|
Class 1 National Insurance Thresholds |
2018 to 2019 |
|
LEL
|
£116 per week £503 per month £6,032 per year |
|
Primary Threshold (PT) |
£162 per week £702 per month £8,424 per year |
|
Secondary Threshold (ST) |
£162 per week £702 per month £8,424 per year |
|
Upper Secondary Threshold (under 21) (UST) |
£892 per week £3,863 per month £46,350 per year |
|
Apprentice Upper Secondary Threshold (apprentice under 25) (AUST) |
£892 per week £3,863 per month £46,350 per year |
|
Upper Earnings Limit (UEL) |
£892 per week £3,863 per month £46,350 per year |
Employee (Ees) deductions at the following rates: -
|
NI Category Letter |
Earnings at or above LEL up to and including PT |
Earnings above the PT up to and including UEL |
Balance of earnings above UEL |
|
A |
0% |
12% |
2% |
|
B |
0% |
5.85% |
2% |
|
C |
Nil |
Nil |
Nil |
|
H (apprentice under 25) |
0% |
12% |
2% |
|
J |
0% |
2% |
2% |
|
M (under 21) |
0% |
12% |
2% |
|
Z (under 21 deferment) |
0% |
2% |
2% |
Employer (Ers) deductions at the following rates: -
|
NI Category Letter |
Earnings at or above LEL up to and including PT |
Earnings above the PT up to and including UEL |
Balance of earnings above UEL |
|
A |
0% |
13.8% |
13.8% |
|
B |
0% |
13.8% |
13.8% |
|
C |
0% |
13.8% |
13.8% |
|
H (apprentice under 25) |
0% |
0% |
13.8% |
|
J |
0% |
13.8% |
13.8% |
|
M (under 21) |
0% |
0% |
13.8% |
|
Z (under 21 deferment) |
0% |
0% |
13.8% |
For qualifying employers, the £3,000 Employer’s National Insurance allowance remains in force for the 2018-19 year. This means that for you don’t pay Employer’s National Insurance for the first £3,000 in the tax year.
Unfortunately, this does not apply to companies such as those which only employ one director and no other staff. There are also some other exceptions such as those that work in the public sector. To check if you’re eligible please visit https://www.gov.uk/claim-employment-allowance.
If you have any benefits through work, such as healthcare or a company car, the employer must also pay Class 1A national insurance at 13.8% on those benefits. To find out more and check if you need to pay this please visit https://www.gov.uk/employer-reporting-expenses-benefits/overview.
Director’s Salaries
If you are a director who has a salary and takes dividends, we would recommend that the optimal salary to take for the 2018-19 tax year is £698 per month. This puts you in the LEL category (whereby you are deemed to have paid national insurance) but just below the PT category (whereby you actually pay national insurance). This will use up most of your personal allowance, reduce your corporation tax liability by around £1,500 and will protect your state pension.
If we run your payroll for you and you are currently being paid our 2017-18 optimal recommendation of £678 per month then we will automatically adjust your salary in April 2018 to £698 per month.
To find out in more detail about 2018-2019 rates and allowances please visit https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2018-to-2019.
Helen Fielding
19 February 2018