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ACCA Strategic Professional · Advanced Taxation (UK) · National insurance contributions for employed and self-employed persons

Clearwell Ltd has two employees, each paid £30,000 per year. Employer's Class 1 NIC is 15% on earnings above £5,000 per employee. Neither employee is a director. What is the employer's Class 1 NIC payable after employment allowance?

Clearwell Ltd's employer Class 1 NIC is £7,500, calculated as two employees times £25,000 above the threshold at 15%. The £10,500 employment allowance is larger than this, so nothing is payable, and the unused £3,000 of allowance is lost for the year.

  1. A£0Correct
  2. B£7,500
  3. C£10,500
  4. D£4,500

Explanation

Gross employer NIC is 2 x (£30,000 - £5,000) x 15% = 2 x £3,750 = £7,500. The employment allowance of £10,500 exceeds this, so the net liability is nil. Unused allowance is not refunded or paid out.

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