National Insurance Contributions (NICs)

Class 1 (not contracted out) Employer Employee
Payable on weekly earnings of:    
    Up to £109 (lower earnings limit) Nil Nil
    £109 - £148 (employers’ earnings threshold) Nil 0%*
    £148.01 - £149 (employees’ earnings threshold) 13.8% 0%*
    £149.01 - £797 (upper earnings limit) 13.8% 12%
    Over £797 13.8% 2%
*No NICs are actually payable but notional Class 1 NIC is deemed to have been paid; this protects certain basic state benefit entitlements. Over state retirement age, the employee contribution is generally nil.
Class 1A on relevant benefits 13.8% Nil
Class 2 Self employed £2.70 per week
  Limit of net earnings for exception £5,725 per annum
Class 3 Voluntary £13.55 per week
Class 4** Self employed on profits  
  £7,755 - £41,450 9%
  Excess over £41,450 2%
**Exemption applies if state pension age was reached by 6 April 2013.

Real Time Information and PAYE penalties

HMRC's new Real Time Information (RTI) regime comes into effect in April 2013, and will require most employers to submit information about the payments and deductions they have made under PAYE at or before the time of payment.

HMRC has agreed a temporary relaxation of reporting arrangements for smaller businesses. Until 5 October 2013, employers with fewer than 50 employees who pay their staff weekly or more regularly and find it difficult to report at the time of payment may send information by the date of their regular payroll, but no later than the end of the tax month. HMRC will continue to assess the impact of RTI on the smallest businesses, throughout the summer.

Historically, inaccuracies have gone undetected for long periods of time as the overall tax liability has not been reviewed and calculated until after the end of the tax year. The aim of the new system is to ensure that the correct deductions are made from pay, resulting in more individuals paying the right amount of income tax and NICs throughout the tax year.

HMRC has confirmed that for the tax years 2012/13 and 2013/14 there will be no change to the existing penalties for late filing of returns, and there will be no penalties for in-year Full Payment Submissions (FPSs) that are submitted late. However, penalties may be charged after the end of the tax year, based on the final FPS for the year.

Employers must submit an FPS every time they make a payment to an employee. To avoid a late filing penalty, the final FPS for an employee must be reported by 19 April. After 19 April, employers can submit an Earlier Year Update by 19 May to avoid a penalty. Employers who do not pay any employees in a tax month must send an Employer Payment Summary by the 19th of the following tax month.

For 2012/13, penalties will not be applied for inaccuracies found within the in-year FPS. However, they may be charged after the end of the tax year based on the final FPS for the year. Penalties may also apply for inaccuracies found within the in-year returns for the 2013/14 tax year, using existing criteria. From 6 April 2014 there will be new late filing and late payment penalties.