National Insurance Contributions
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 | 2020/21 |
|---|---|---|---|---|---|
Class 1 | Employees under State Pension age | Class 1 (employment) Weekly earnings Primary threshold | Employee's Threshold | ||
£162 | £166 | £183 | |||
Weekly earnings Secondary threshold |
| £166 | £169 | ||
Weekly Upper Earnings threshold |
| £962 | £962 | ||
Employee's Rate | |||||
| £162.01 - £892 p/w | 12% | ||||
| Excess over £892 | 2% | ||||
| £166.01 - £962 p/w | 12% |
| |||
| £183.01 - £962 p/w |
| 12% | |||
| Excess over £962 | 2% | 2% | |||
Class 1A or 1B | Employer's | Employer's Rate | |||
| Excess over £162 p/w | 13.80% | ||||
| Excess over £166 p/w | 13.80% |
| |||
|
| Excess over £319 p/w |
| 13.8% | |
Class 2 | Self Employed | Small Profits Threshold (SPT) | Self Employed Threshold | ||
£6,205 | £6,365 | £6,475 | |||
Self Employed Rate | |||||
| Class 2 rate below SPT* | 0% | 0% | 0% | ||
| Class 2 weekly flat rate above SPT | £2.95 | £3.00 | £3.05 | ||
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 | £15.30 | |||
Class 4 | Self Employed | Class 4 rate on profits ** | Self Employed Threshold | ||
| Lower Profits Limit (LPL) | £8,424 | £8,633 | £9,500 | ||
| Upper Profits Limit (UPL) | £46,350 | £50,000 | £50,000 | ||
Self Employed Rate | |||||
| Below LPL | 0% | 0% | 0% | ||
| Between LPL and UPL | 9% | 9% | 9% | ||
| Above UPL | 2% | 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 March 2020 (11th March 2020 UK 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.