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Example 5

J Spencer is both employed and self-employed. His total earnings for the 2021 to 2022 tax year from his Class 1 employment are £72,000. He is paid £3500 per month and receives a £15000 bonus in June and December. His maximum Class 1 and 2 liability is calculated as follows:

Step 1

Deduct the relevant Primary threshold from the relevant UEL and multiply that figure by 53.

967 - 184 = 783 x 53 = 41,499

Step 2

Multiply the result of step 1 by 12%

41,499 x 12% = 4,979.88

Step 3

Add together so much of the person’s earnings from each employed earner’s employment as exceeded the Primary Threshold but did not exceed the Upper Earnings Limit.

3,500 (monthly earnings) - 797 (monthly PT) = 2703 x 10 = 27,030

4,189 (monthly UEL) - 797 (monthly PT) = 3,392 x 2 (June + Dec) = 6,784

Total 27,030Ìý+ 6,784 = 33,814

Step 4

Deduct from the total found at step 3 step the amount produced by step 1

33814 - 41,499 = minus 7,685

Step 5

If the figure produced at step 4 is a positive figure multiply that figure by 2%. If the figure produced at step 4 is a negative figure, it is treated for the purposes of step 8 as nil

Nil

Step 6

Add together so much of the person’s earnings from each employment as exceeded the Upper Earnings Limit.

37,000 (monthly earnings Jun + Dec) - 8,378 x 2 (monthly UEL) = 28,622

Step 7

Multiply the result of step 6 by 2%

28,622 x 2% = 572.44

Step 8

Add together the results of steps 2, 5 and 7.

4,979.88 + nil + 572.44 = 5,552.32

J Spencer’s maximum for the 2021 to 2022 tax year is £5,552,32Ìý

Since the employee will not have met his maximum by payment of Class 1 NICs, payment of Class 2 NICs is required.

»Ê¹ÚÌåÓýapp reason why the employee has not met his maximum is that in ten of the twelve months his earnings did not reach the monthly UEL. »Ê¹ÚÌåÓýapp employee will not have paid main rate Class 1 contributions at 12% on earnings amounting to 53 x the UEL less the PT and some Class 2 NICsÌýwill be due.