National Insurance Query

MrSafeGaz

I realise that Income Tax is cumulative so that it naturally corrects itself over the course of a year if your income spikes a month or two throughout the year but as far as I can see your NIC appears to depend upon the current month only.

Assuming the above is true, if overtime is an option for an employee, would it be more profitable tax wise if overtime was 'saved up' and then all claimed in a single month. If this caused the monthly wage to go shooting over the upper earnings limit then you would get charged only 1% tax on some of the overtime. Where as if the overtime was spread over a few months, keeping it below the UEL, it would all be taxed at 11%.

This seems more profitable in theory but does your NIC get 'corrected' in this particular scenario? If so, how?

Thanks.

GARDINER

I don't think your employer would be prepared to do this as tax and nic's are due on 'receipts' basis and receipts basis actually means when the employee becomes entitled to the payments (if that is the earliest date). If you are a company director then there are special rules to stop this sort of practice.

MrSafeGaz

Thanks for the reply although my question still remains unanswered. Whether it is right or wrong, is the scenario I explained more profitable tax wise? Or would it get corrected the following months?

CLAPTON

yes you are correct; the NI depends only on the monthly pay and is not cumulative .... so in principle if your total overtime is paid altogether and takes you into the 1% zone then you would pay less NI overall compared to it being spread out.

MrSafeGaz

CLAPTON wrote: »

yes you are correct; the NI depends only on the monthly pay and is not cumulative .... so in principle if your total overtime is paid altogether and takes you into the 1% zone then you would pay less NI overall compared to it being spread out.

Thats the answer I was looking for, thanks