National Insurance Contributions

National Insurance Contributions

Overview

National Insurance (NI) is a system of taxes paid by employees and employers and is used primarily to fund state benefits. Employers will need to pay Class 1A NIC on the Benefit in Kind  value of company cars and free personal fuel, Employees do not pay NIC on these benefits.

 Questions you may ask:

  • What is the impact of NI with regards company cars?
  • How is the tax collected?
  • Do employees pay National insurance on all their earnings?

How it works?

National Insurance payments are paid on earnings above the weekly earnings primary threshold for people in employment and on profits above the Small Profits Threshold (SPT) or Lower Profits Limit (LPL) dependant up the applicable National Insurance Class. 

Please see details in the table below. 

NI Class

Payable By

NATIONAL INSURANCE

2018/19

2019/20

Class 1

Employees under State Pension age

Class 1 (employment) Weekly earnings  Primary threshold

Employee's Threshold

£162

£166

 

Employee's Rate

£162.01 –  £892 per week

12%

 

Excess over £892

2%

 

£166.01 –  £962 per week

 

12%

Excess over £962

 

2%

Class 1A or 1B

Employer's

 

Employer's Rate

Excess over £162 per week

13.80%

 

Excess over £166 per week

 

13.80%

Class 2

Self Employed

Small Profits Threshold (SPT)

Self Employed Threshold

£6,205

£6,365

 

Self Employed Rate

Class 2 rate below SPT*

0%

0%

Class 2 weekly flat rate above SPT

£2.95

£3.00

Class 3 voluntary contributions that count towards your total contribution record

Employees or Self Employed if: 1. you're not working, 2. you're not liable for, or you're exempt from, Class 1 or Class 2 contributions, 3. your contributions for a specific year aren't enough to count towards state pension entitlement, 4. you live abroad

Class 3 (VoluntaryContribution) per week

Contribution Per week

£14.65

£15.00

Class 4

Self Employed

Class 4 rate on profits **

Self Employed Threshold

Lower Profits Limit (LPL)

£8,424

£8,633

Upper Profits Limit (UPL)

£46,350

£50,000

 

Self Employed Rate

Below LPL

0%

0%

Between LPL and UPL

9%

9%

Above UPL

2%

2%

* The government has announced that it will abolish Class 2 NICs with effect from April 2018

** The government will reform Class 4 NICs so that self employed individuals continue to build entitlement to the state pension and other contributory benefits following the abolition of Class 2 NICs in April 2018.

The information provided is based on existing and proposed legislation as at November 2017 (2017 Autumn Budget). Whilst every effort has been made to ensure that information given is accurate and not misleading, this information is intended to provide a quick reference to the current tax regulations relating to company vehicles and how they impact employers and employees. The content has been provided for informational purposes only and should not be relied on as a substitute for professional advice. No responsibility can be accepted by LetsTalkFleet Ltd for any loss or liability occasioned by any person acting on or refraining from action as a result of viewing this information.