If you employ anyone under 21 years of age (and over 16) please be aware that you use the correct National Insurance category letter to benefit from the new initiative. Since 6 April 2015, employers with employees under 21 years of age are no longer required to pay Class 1 NICs on earnings up to the Upper Secondary Threshold (UST) for those employees.
Class 1 secondary NICs will apply if the employee is earning above the UST. Employees will continue to pay the standard rate of primary Class 1 NICs through their salary. Please note that the zero rate does not apply to Class 1A or Class 1B NICs.
When assessing your employees’ secondary NICs, please note that there are seven National Insurance categories:
• M – not contracted-out standard rate contributions
• Z – not contracted-out deferred rate contributions
• Y – mariners not contracted-out standard rate contributions
• P – mariners not contracted-out deferred rate contributions
• V – mariners contracted-out salary related contributions
• I – contracted-out salary related standard rate contributions
• K – contracted-out salary related deferred rate contributions
Three of the new letters (V, I and K) will be removed in April 2016 in line with the ending of ‘contracted-out’ status in relation to salary-related occupational pension schemes.
As an employer, it is your responsibility to ensure the correct category letter has been applied based on the age and circumstances of the employee. The categories will also need to be monitored for age and salary changes.
Should you have any queries or wish to talk to me in further detail about it, I can be contacted on firstname.lastname@example.org or 01656 867167.
Source: HM Revenue & Customs 24/09/2015