Tax: NI and NICs
National Insurance (NI) is needed to use the PAYE system. As an employer, you must also pay National Insurance Contributions (NICs) on the earnings you provide to your employees. Earnings include not only cash amounts but benefits, such as providing your employees with company cars. This is paid by employees and employers and there are different types of NICs to pay, depending on whether you are a limited company or a sole trader and considering how much you earn.
UK employees earning over a certain amount and working over specified duration of hours have to pay NI through the PAYE system. If you’re setting up in the UK and not living here, you won’t be expected to pay employee NICs, as you’ll be paying the relevant equivalent in your home country.
As an employer your main responsibilities are:
- To deduct and pay the employer and employee Class 1 NICs due on your employees’ earnings through your payroll.
- To pay employer Class 1A NICs after the end of the tax year on benefits you have provided to your employees.
- To pay employer Class 1B NICs after the end of the tax year if you have agreed a PAYE Settlement Agreement with HM Revenue & Customs.