National Insurance Class 1

Sterlingtimes

I wasn't sure how to articulate this question, so I present an illustration.

I understand that National Insurance contributions are charged above £157 a week (equivalent to £680.33 a month or equivalent to £8,164 a year).

Let's say (for illustrative purposes only) my salary in April 2017 is £2,680.33. My National Insurance deduction would be 12% of £2,000 = £240; then

let's say my salary in May 2017 is £2,680.33. My National Insurance deduction would again be 12% of £2,000 = £240; then

let's say that I retire and earn nothing at all from June 2017 through to the end of the tax year.

Have I lost my £480 for ever, or do the tax authorities say, "He only earned £5,360.66 during the whole year and the annual threshold is £8,164, we will have to give him his £480 back."?

Pennywise

Sterlingtimes wrote: »

Have I lost my £480 for ever, or do the tax authorities say, "He only earned £5,360.66 during the whole year and the annual threshold is £8,164, we will have to give him his £480 back."?

NIC is calculated on a week/month basis, not yearly basis, so the amount paid per week/month is the end of it. There's no looking at earnings over the year as you suggest. In your example, NIC due is £480, you paid £480, end of story.

Sterlingtimes

Pennywise wrote: »

NIC is calculated on a week/month basis, not yearly basis, so the amount paid per week/month is the end of it. There's no looking at earnings over the year as you suggest. In your example, NIC due is £480, you paid £480, end of story.

So simply, Pennywise. Thank you, I rather thought that would be the case. That takes away a niggle that was on my mind. I appreciate your clarification.

Sterlingtimes

eggha wrote: »

NIC does not work on a cumulative basis for normal employees (the exception is for sole directors of their own companies). It is calculated in isolation on each payment you receive and once paid that is it.

The annual figure is relevant only in the context of working out if you have paid enough NI that year to count as a full qualifying year for state pension entitlement purposes, otherwise for example, seasonal workers would be impossible to assess as they may have no pay for long periods

Thank you, eggha for kindly responding my question. I have never had to think about this before. I have just paid NI for 42 years. Retirement is just round the corner.