UK employers have a statutory responsibility to calculate, deduct at source, account for and pay tax to HMRC. This includes both Schedule E income tax due from their employees under the Pay As You Earn (PAYE) Scheme and the appropriate National Insurance contributions (NICs).

National Insurance contributions

Class 1 consists of two parts – the employer’s and the employee’s contribution. The employee’s payment is deducted from pay and paid to HMRC together with the employer’s contribution. Every employee aged between 16 and the State Pension age, and earning more than the Primary Threshold of £155 per week, is liable to pay NICs.

Class 1 NICs are calculated from gross pay, which includes salaries, overtime, bonus payments, and commission plus any variable additional payments (e.g. Statutory Sick Pay or Statutory Maternity Pay).

Reporting PAYE in real-time

HMRC requires employers to report PAYE information in real-time: each time an employee is paid, the employer must submit online the amount paid, deductions and, if applicable, the start or leave date. This is referred to as Real Time Information or RTI and details can be found in Real Time Information (RTI): Improving the operation of Pay As You Earn (

If you are a first-time employer or need to register new staff for National Insurance, you should also read "tax and national insurance".


Every time employees are paid they are entitled to a printout or similar record of their gross pay for the period and the deductions made from it.


The Primary Threshold is one of three levels of earnings used to calculate the correct NICs. These are not the PAYE tax thresholds or personal allowance (the levels of earnings at which income tax becomes payable).

The Lower Earnings Limit (£113 per week or £5,876 annually for 2017-18) is the minimum level of earnings to qualify for benefits such as Retirement Pension and Jobseeker’s Allowance. If earnings reach or exceed this level, but do not exceed the Primary Threshold (£157 per week, £8,164 annually for 2017-18), employees do not pay NICs but will be treated as having paid them when claiming benefit.

Employees who earn between the Primary Threshold and the Upper Earnings Limit (£866 per week or £45,000 annually for 2017-18) pay National Insurance Class 1 contribution at 12% of the amount between £157 and £866 a week. Employees who earn more than £827 a week also pay 2% NICs on additional earnings.

Gross pay – used to work out Class 1 NICs – includes salaries, overtime, bonus payments and commission plus any variable additional payments (e.g. Statutory Sick Pay or Statutory Maternity Pay).

HMRC’s guides Rates and thresholds for employers 2017 to 2018 (, and the NI Tables issued to employers. National Insurance for Company Directors ( explains how NICs should be calculated for directors.