How is national insurance contributions calculated?

Question

I would like to understand how national insurance contributions are calculated. My P60 states the following :
NIC table letter - D (what does this D mean)
Earnings at LEL - 2912
Earnings above the lel upto and including Earnings Threshold - 448
Earnings above earnings threshold, upto and including the UEL- 18580.

Answer 1

The table letter D means that you are "Contracted out" of the state second pension. You pay a lower rate of national insurance and a contribution is made to some non-government scheme (either run by your company or a private pension plan).

No NI is payable on earnings up to the Lower Earnings Limit (LEL).

The earnings between the LEL and the Primary Threshhold (PT) are subject to NI but the rate is currently 0%. (this might sound silly but there is a different treatment for benefits between someone who hasn't paid NI and someone who has paid nothing but their earnings are in that 0% band)

Earnings above the PT are subject to NI at 9.4%. There is an upper limit where the NI rate drops to 1% but your earnings are not that high.

Your contributions should, therefore, be 9.4% of £18,580 or £1,746.52.

If it is different it probably means that your income fluctuates. A feature of the NI system (as opposed to the tax system) is that the calculations are done separately for each pay period. No cumulative calculations are carried out unless you are a company director. A big bonus in one month could put you over the Upper Earnings Limit for that month.

Answer 2

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RE :How is national insurance contributions calculated?
I would like to understand how national insurance contributions are calculated. My P60 states the following :
NIC table letter - D (what does this D mean)
Earnings at LEL - 2912
Earnings above the lel upto and including Earnings Threshold - 448
Earnings above earnings threshold, upto and including the UEL- 18580.
Follow 2 answers

Answer 3

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RE :How is national insurance contributions calculated?
I would like to understand how national insurance contributions are calculated. My P60 states the following :
NIC table letter - D (what does this D mean)
Earnings at LEL - 2912
Earnings above the lel upto and including Earnings Threshold - 448
Earnings above earnings threshold, upto and including the UEL- 18580.
Follow 3 answers

Answer 4

Your contributions are made weekly if your pay is more than approx£147 and that's it. N.I. is not cumulative like tax so there are no adjustments to make at the end of the year.