NIM12031 - Class 1: Calculating Class 1 NICs for Directors: Annual earnings periods: Examples: Regular monthly salary alternative method - 2025 to 2026
Regulation 8 Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)
Director paid 拢3000 on 28th of each month starting April 2025. They receive a 拢5,000 bonus in October 2025. This Director has their NICs calculated each month using the alternative method which treats him like an employee until the final payment for the tax year which must be reconciled for their annual earnings period. The monthly thresholds for 2025 to 2026 are:聽聽
Secondary Threshold (ST) 鈥� 拢417
Lower Earnings Limit (LEL) - 拢542聽
Primary Threshold (PT) 鈥� 拢1048
Upper Earnings Limit (UEL) - 拢4,189聽
| Date | Cumulative | Primary | Secondary | Notes |
|---|---|---|---|---|
28 April - September聽 |
拢3,000 |
拢156.16听 拢3,000 - 拢1048 x 8%聽 |
拢387.45 拢3,000 - 拢417 x 15%聽 |
Earnings exceed both primary & secondary thresholds -same amount deducted each month聽 |
28 October聽 |
拢8,000 |
拢327.50 (拢4,189 - 拢1048 x 8%) + (拢8,000 - 拢4,189 x 2%)聽 |
拢1,137.45 (拢8,000 - 拢417 x 15%)聽 |
Earnings exceed UEL |
28 November - February聽 |
拢3,000 |
拢156.16 |
拢387.45 |
Calculations as before |
Total |
拢38,000 |
拢1,889.10 |
拢5,011.95 |
Year to date total NICs paid |
28 March Reconciliation聽聽 |
拢41,000 |
拢385.30 ((拢41,000 - 拢12,570 x 8%) = 拢2274.40 less NICs paid to date of聽 拢1,889.10)聽 |
拢388.05 (拢41,000 - 拢5,000 x 15%聽= 拢5,400 less NICs paid to date of 拢5,011.95) |
Earnings for year have聽annual thresholds applied.聽 |
In Month 12 the director has to pay an additional 拢229.14 (this is the total due for reconciliation 拢385.30 - 拢156.16 which is the NICs due on March salary) to reconcile the additional NICs due from the bonus payment paid in October.聽
In Month 12 the employer pays an extra 拢0.60 compared to other months due to the 拢4 difference between 12 x monthly ST and annual ST.聽