National insurance contributions for employed and self-employed persons: formula sheet

Key formulas

Nil band

Earnings £1 – £12,570: NIC = nil

Annual figure. The primary threshold. Taken from the rates ACCA provides.

Main rate band

Earnings £12,571 – £50,270: NIC = 8% × (earnings up to £50,270 − £12,570)

The maximum charge in this band is 8% × £37,700 = £3,016.

Additional rate band

Earnings above £50,270: NIC = 2% × (earnings − £50,270)

Only the excess over the upper earnings limit is charged at 2%.

Total Class 1 employee NIC

Total = 8% × (lower of earnings and £50,270 − £12,570) + 2% × (earnings − £50,270, if positive)

If earnings are £12,570 or less, the total is nil.

Class 1 secondary NIC per employee

(Annual earnings − £5,000) × 15%

Only where earnings exceed £5,000. Nil on the first £5,000. Calculate for each employee separately.

Employer NIC payable after allowance

Total secondary NIC − employment allowance (£10,500), minimum nil

Allowance is given only if the employer is eligible. Unused allowance is lost.

Class 1A rate (for contrast)

15% × taxable benefits

Separate charge on benefits. Do not include it in the secondary Class 1 calculation.

Class 1A NIC

Class 1A NIC = cash equivalent of taxable benefits × 15%

Paid by the employer only. The 15% rate is given in the ACCA tax tables.

Car benefit

Car benefit = list price × car benefit percentage

The percentage depends on CO2 emissions or, for hybrids, electric range. Electric cars with zero emissions use 3%. A petrol car at 55 g/km uses 17%.

Car fuel benefit

Car fuel benefit = £28,200 × car benefit percentage

Only applies if the employer pays for fuel used privately. It is also subject to Class 1A.

Van benefits

Van scale charge £4,020; van fuel benefit £769

Zero-emission vans have a 0% benefit, so no Class 1A arises on them.

Due date

Due by 22 July after the tax year end (electronic payment); 19 July if paid by post

For 2026/27 benefits the due date is 22 July 2027, paid once a year.

Class 4 lower profits limit

Profits up to £12,570 × 0% = nil

No Class 4 is due on this slice.

Class 4 main rate band

(Lower of profits and £50,270 − £12,570) × 6%

The band is £37,700 wide. The maximum main rate charge is £37,700 × 6% = £2,262.

Class 4 additional rate

(Profits − £50,270) × 2%, if profits exceed £50,270

Only the excess over the upper profits limit is charged at 2%.

Total Class 4 NIC

Main rate charge + additional rate charge

Calculate separately for each sole trader or partner.

Class 1 employee NIC

£1 to £12,570: nil; £12,571 to £50,270: 8%; above £50,270: 2%

Annual bands for the employee's earnings. Apply each rate only to the slice in its band.

Class 1 employer NIC

£1 to £5,000: nil; above £5,000: 15%

Paid by the employer on top of the salary. The employment allowance of £10,500 can reduce the employer's bill.

Class 4 NIC

£1 to £12,570: nil; £12,571 to £50,270: 6%; above £50,270: 2%

Paid on the self-employed person's taxable trading profits.

Class 2 NIC

No Class 2 payable on the ACCA rates table

No longer compulsory. Voluntary payment is possible for low profits. Do not compute it.

Total NIC cost, employed route

Employee Class 1 + employer Class 1

Compare this with Class 4 alone for the self-employed route.

Quick revision

• Class 1 employee: nil on £1 to £12,570, 8% on £12,571 to £50,270, 2% above £50,270.
• Class 1 employer: nil on £1 to £5,000, then 15% on everything above £5,000.
• Employment allowance is £10,500. Set it against the employer's Class 1 secondary and Class 1A liabilities, where the employer is eligible. Never set it against employee Class 1 or Class 4. Use it only when the question says the employer is eligible.
• Class 1A is 15% and is paid by the employer on taxable benefits.
• Class 1A is charged on the benefit amounts, not on salary.
• Class 4: nil on £1 to £12,570, 6% on £12,571 to £50,270, 2% above £50,270.
• Class 4 is based on taxable trading profits, not on drawings.
• Calculate each NIC band separately and add the results.
• The employee and Class 4 thresholds are £12,570 and £50,270. The employer threshold is £5,000.
• The TX-UK tables for this session give no Class 2 rate, so you do not calculate Class 2.
• In an employed versus self-employed comparison, include the employer's NIC as a cost of the employee.

Common mistakes

• Charging 8% on the whole of earnings Fix: Always deduct £12,570 first. Only the slice above it is charged.
• Charging 2% on all earnings once pay exceeds £50,270 Fix: Charge 8% on the £37,700 band, then 2% only on the excess over £50,270.
• Applying 15% to the whole payroll without taking off £5,000 per employee Fix: The £5,000 applies to each employee separately. Deduct it employee by employee.
• Using the employee's threshold of £12,570 or the 8% rate Fix: Employer rate is 15% above £5,000. Employee rate is 8% between £12,571 and £50,270, then 2%.
• Charging Class 1A on the employee as well as the employer Fix: Remember that Class 1A is employer-only. State this in any written answer.
• Applying the 15% to the benefit before reducing it for private use contributions or part-year availability Fix: Finish the income tax benefit calculation first. Class 1A uses the final taxable figure.
• Charging 6% on all profits above £12,570 without applying the 2% rate above £50,270. Fix: Always test whether profits exceed £50,270. If they do, split the profit into the 6% slice and the 2% slice.
• Calculating Class 4 on the total partnership profit. Fix: Divide the profit using the profit-sharing arrangement first. Calculate Class 4 for each partner separately on their own share.
• Calculating a Class 2 charge Fix: Class 2 is not compulsory and the ACCA table has no rate. State that no Class 2 is payable.
• Forgetting employer Class 1 in the employed route Fix: A fair comparison includes the 15% employer cost above £5,000.

Exam tips

• In objective test questions, check whether the question asks for employee or employer NIC before you calculate. A correct figure for the wrong class scores zero.
• Look for benefits in the question. Strip them out of the NIC earnings and say why in Section C.
• Show the three bands as separate lines in a Section C working. This protects method marks if you slip on arithmetic.
• The rates are given in the exam, so use the printed table. Spend your time on identifying earnings correctly.
• Write the 15% and £5,000 figures at the top of your working so you do not slip into employee figures.
• In Section B scenarios, read for eligibility clues before you calculate. A sole-director company is a classic trap.
• Show each employee's NIC on a separate line in constructed-response answers so you pick up method marks even if one number is wrong.
• Objective questions are all or nothing, so check that your final answer is floored at nil.