Classes of NIC and who pays them

Produced by Tolley in association with Jim Yuill at The Yuill Consultancy

The following Employment Tax guidance note Produced by Tolley in association with Jim Yuill at The Yuill Consultancy provides comprehensive and up to date tax information covering:

  • Classes of NIC and who pays them
  • Class 1 NIC
  • Primary (employee) liability
  • Secondary (employer) liability
  • Brexit
  • Cases where no UK NIC arises
  • Cases where there may be UK NIC liability
  • Effect of EC Regulation 883/2004
  • The host employer rules
  • Class 1A NIC for expatriates
  • More...

Classes of NIC and who pays them

Class 1 NIC

Class 1 NIC is payable on earnings paid to an employed worker which derive from, or are treated as deriving from, an employed earner’s employment in the UK. There are two kinds of Class 1 NIC, primary contributions for which the employee is liable and secondary contributions which are payable by a ‘secondary contributor’. The secondary contributor is usually the employer, but in some cases as set out below may be another defined party.

Primary (employee) liability

For a primary liability to arise, the employed earner must be resident or present in the UK at the time of the employment, or ordinarily resident in the UK at that time. The fact that presence in the UK is sufficient to create a NIC liability means that unless an exemption applies, employment in the UK for however short a time will create a NIC liability.

Employment in an EEA country or Switzerland, or in a country with which the UK has a bilateral social security agreement will often require NIC liabilities to continue. In such circumstances, an individual is treated as being continuously resident in the UK.

Secondary (employer) liability

For a secondary liability to arise, the person who would be the secondary contributor must be resident or present in the UK when NIC becomes payable, or has a place of business in the UK at that time.

Brexit

The UK negotiated a Withdrawal Agreement and left the EU on 31 January 2020 (referred to as ‘exit day’) with an 11-month implementation period up to 31 December 2020. While exit day was important in terms of being the date the UK ceased to be an EU member state, the majority of key domestic tax and social security changes associated with Brexit take effect from the end of the implementation period (specifically, 11pm (GMT) on 31 December 2020, referred to as ‘(implementation period) IP completion day’). See the Brexit ― personal and employment tax

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