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Taxation (UK) · National insurance contributions for employed and self-employed persons

How to Calculate Class 1 Employee NIC in TX-UK

Updated 11 October 2026 · Fact-checked

Class 1 employee (primary) NIC is charged on an employee's annual earnings. Earnings up to £12,570 bear nil, earnings from £12,571 to £50,270 bear 8%, and earnings above £50,270 bear 2%. Calculate each band separately, then add the results. The employee's NIC is not deducted as an expense for income tax.

Understand Class 1 Employee NIC

National insurance contributions (NIC) are a separate charge from income tax. They are paid by employees, employers and the self-employed. Class 1 employee NIC, also called primary contributions, is paid by the employee and collected through payroll.

It is charged on earnings. Earnings for NIC are broadly gross pay: salary, wages, bonuses and commission. This differs from income tax in some respects, so read the question carefully for what counts as earnings. Taxable benefits in kind do not attract Class 1 employee NIC. They attract Class 1A, paid by the employer.

The charge works in bands, like income tax. In the rates ACCA provides, the first £12,570 of annual earnings is charged at nil. This is the primary threshold. Earnings from £12,571 to £50,270 are charged at 8%. This is the main rate. Earnings above £50,270 are charged at 2%. The £50,270 point is the upper earnings limit.

The 2% rate is lower than the 8% rate. So NIC does not rise sharply for high earners as income tax does. Only the slice of pay in each band is charged at that band's rate. Whole earnings are never charged at one rate.

The tables in the exam give the figures, so you do not need to memorise them. You must know how to apply them and how to keep employee NIC separate from employer NIC, which has its own threshold and rate.

Key rules to remember

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.

How to solve Class 1 Employee NIC questions

Use the same short method for every Class 1 employee NIC question.

  1. 1Identify the employee's annual earnings for NIC. Use gross pay, including bonuses. Leave out taxable benefits in kind, as these attract Class 1A.
  2. 2Check the period. If the figures are monthly or weekly, either annualise or use the annual figures for the whole year, as the question asks.
  3. 3Compare earnings with £12,570. If earnings are no higher, NIC is nil.
  4. 4Charge 8% on earnings between £12,570 and £50,270. If earnings are above £50,270, this slice is £37,700.
  5. 5Charge 2% on earnings above £50,270.
  6. 6Add the two amounts and round to the nearest £ as the exam instructions allow.
  7. 7State clearly that this is the employee's contribution. Do not mix it with the employer's amount.

Quickest way: Two-slice shortcut

When to use it: Use this for any full-year employee with earnings from a single employment.

  1. If earnings ≤ £12,570, write nil and stop.
  2. If earnings are £12,571 to £50,270, NIC = 8% × (earnings − £12,570).
  3. If earnings exceed £50,270, NIC = £3,016 + 2% × (earnings − £50,270).
  4. Check the answer is sensible. It should never exceed 8% of earnings.

Common mistakes in Class 1 Employee NIC

  • Charging 8% on the whole of earnings

    Students treat NIC like a flat percentage of pay.

    Fix: Always deduct £12,570 first. Only the slice above it is charged.

  • Charging 2% on all earnings once pay exceeds £50,270

    Students think the higher band replaces the main rate for the entire amount.

    Fix: Charge 8% on the £37,700 band, then 2% only on the excess over £50,270.

  • Including taxable benefits in earnings

    Employment income for income tax includes benefits, so students carry the figure across.

    Fix: Use cash earnings only. Benefits attract Class 1A NIC for the employer instead.

  • Using the employer's threshold of £5,000 or rate of 15%

    Both employee and employer Class 1 tables appear together.

    Fix: Label your working 'employee'. The employee uses £12,570, 8% and 2%.

  • Deducting pension or Gift Aid amounts from NIC earnings

    Students copy the income tax adjustments.

    Fix: Do not apply income tax reliefs to NIC unless the question tells you how the earnings are defined.

Worked examples

Example 1

Priya earns a salary of £42,000 for the tax year. Calculate her Class 1 employee NIC.

Show the solution
  1. Earnings are £42,000, which is above £12,570 and below £50,270.
  2. Slice charged at 8% = £42,000 − £12,570 = £29,430.
  3. NIC = 8% × £29,430 = £2,354.40.
  4. Round to the nearest £: £2,354.

Answer: Priya's Class 1 employee NIC is £2,354.

Example 2

Daniel earns a salary of £55,000 and a bonus of £15,000 in the tax year. He also has a taxable company car benefit of £6,000. Calculate his Class 1 employee NIC.

Show the solution
  1. Earnings for NIC = £55,000 + £15,000 = £70,000. The £6,000 car benefit is excluded.
  2. Nil on the first £12,570.
  3. 8% band: £50,270 − £12,570 = £37,700. NIC = 8% × £37,700 = £3,016.
  4. 2% band: £70,000 − £50,270 = £19,730. NIC = 2% × £19,730 = £394.60.
  5. Total = £3,016 + £394.60 = £3,410.60, which is £3,411 to the nearest £.

Answer: Daniel's Class 1 employee NIC is £3,411.

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.

Practice questions from National insurance contributions for employed and self-employed persons

Class 1 Employee NIC in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Class 1 Employee NIC: frequently asked questions

What are the Class 1 employee NIC rates in TX-UK?

In the rates ACCA provides for this session, annual earnings of £1 to £12,570 bear nil, £12,571 to £50,270 bear 8%, and earnings above £50,270 bear 2%. Each slice is charged at its own rate.

What is the primary threshold?

It is the level of earnings below which an employee pays no Class 1 NIC. In these notes it is £12,570 a year. Only earnings above it are charged.

Do benefits in kind attract Class 1 employee NIC?

No. Taxable benefits attract Class 1A NIC, which is paid by the employer. Employee NIC is based on earnings such as salary, wages and bonuses.

Is employee NIC the same as employer NIC?

No. The employer's Class 1 charge has a £5,000 threshold and a 15% rate. The employee's charge has the £12,570 threshold with 8% and 2% rates.