15 March 2022

Use the Correct National Insurance Letter to pay the correct amount

With the 1.25% increase in National Insurance Contributions (NICs) from 6 April 2022 to help fund health and social care it is important that employers use the letter that is appropriate for that employee.

This is particularly important where you employ apprentices under the age 25 (H) and other employees under the age of 21 (M) as there are no employer contributions where the employee is paid no more than £50,270 a year. Although the employee pays 13.25% on earnings above the[?] 15.05% employer contributions are not payable. This is clearly designed to encourage employers to take on apprentices and young adults.

Five new NIC letters are being introduced from 6 April 2022 for military veterans (V) and employees working in a designated Freeport area (in most cases F). Note that the exemption from employers NIC for military veterans only operates for the first 12 months of their civilian employment and the exemption for Freeport workers applies for 36 months. In each case after that initial period the normal NIC letter should apply to that employee.

There are three further NIC letters for workers in Freeport areas with special circumstances.

Check the tables below for the correct letter!

Category letterEmployee group
AAll employees apart from those in groups B, C, J, H, M and Z in this table
BMarried women and widows entitled to pay reduced National Insurance
CEmployees over the State Pension age
JEmployees who can defer National Insurance because they’re already paying it in another job
HApprentice under 25
MEmployees under 21
VMilitary veterans in first 12 months of civilian employment
ZEmployees under 21 who can defer National Insurance because they’re already paying it in another job

The 4 NIC letters that apply for workers within a Freeport are as follows:-

Category letterEmployee group
FStandard category letter equivalent (not within I, S, or L)
IMarried women and widows entitled to pay reduced National Insurance contributions
SEmployees over state pension age
LEmployees who can defer National Insurance contributions

Please talk to us about planning ahead because with some help you may be able to make your money work harder for you and reduce the amount the taxman can take. Your financial plans may need a fresh look, and you may need an expert to help you. We are ready to provide all the help you need. For more information and to discuss your tax affairs in further detail, contact Mariske Byrnes or your usual BM Connect adviser.  

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