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Employers pay National Insurance Contributions (NICs) on the earnings provided to employees. Earning includes cash and benefits. The amount is calculated and deducted through the PAYE (Pay As You Earn) system when doing payroll. NICs are paid to HM Revenue & Customs (HMRC).
The employer contributes 13.8% on earning above £758 per month. The NICs funds national health service, pension, childcare vouchers, sick pay, maternity and paternity pay, shared parental pay and adoption pay.
The tax deduction is calculated and taken by HMRC through the PAYE system. For benefits in kind, such as company car, private health insurance, childcare or travel and entertainment expenses, the employer must inform HMRC and pay tax and National Insurance.
Employers have to offer a pension scheme to all employees within three months of commencement of work on an 'automatic enrolment' base. It is up to each employee to join it or not. The employer doesn't need to enrol an employee in the pension scheme if they already have a plan that meets the automatic enrolment requirements. The same is valid if the employee is from another EU member state and is in an EU cross-border pension scheme.
The employer must inform the employee in writing when they have been enrolled in their workplace pension scheme. In it they should state:
From April 2019, an employer's minimum contribution is 3%, the employee one is 5%, and the government tax relief is 1%, for a total minimum contribution of 8%.
Employers must automatically re-enrol an employee in the scheme every three years if they have previously left the plan. The employee can leave again, but only once they've been re-enrolled.
Employees pay National Insurance Contributions (NICs), which builds up the workers’ entitlement to social security benefits such as a Jobseeker Allowance and the State Pension. The deduction is calculated and deducted through the PAYE system by the employer at the time of doing payroll.
The deduction depends on the National Insurance category letter and employee’s earnings within each salary range.
Income tax is collected by HM Revenue & Customs (HMRC) through Pay As You Earn (PAYE) system every time employees are paid. It’s the employer’s responsibility to deduct tax and NIC’s from an employee’s pay and inform HMRC about any taxable benefits in kind an employee receives.
The first £12,570 of the employees’ annual income are tax-free (personal allowance). Earnings over £100,000 yearly lose £1 of the personal allowance for every £2 earned over £100,000.
| TYPE | RATE | BAND |
| Personal Allowance | 0% | Up to £12,570 |
| Basic Rate | 20% | £12,571 - £50,270 |
| Higher Rate | 40% | £50,271 - £125,140 |
| Additional Rate | 45% | over £125,140 |
| TYPE | RATE | BAND |
| Personal Allowance | 0% | Up to £12,570 |
| Starter Rate | 19% | £12,571 - £14,876 |
| Basic Rate | 20% | £14,877 - £26,561 |
| Intermediate Rate | 21% | £26,562 - £43,662 |
| Higher Rate | 42% | £43,663 - £75,000 |
| Advanced Rate | 45% | £75,001 - £125,140 |
| Top Rate | 48% | over £125,140 |
Employers must offer a workplace pension scheme to every employee, but it is up to the employee to take it or not.
If the employee chooses to enter the pension scheme, their minimum contribution is 4% of their salary. The employer’s minimum contribution is 3%, and government tax relief is 1%, for a total minimum contribution of 8%.
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