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Business Doctor: Part-time workers may pay too much Nics

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PL writes: I employ some part-time staff who also work for other unrelated businesses. When calculating their salary, I’ve been informed that they are charged national insurance on each of their employments, which can be quite costly for them. Is this correct?

The national insurance contribution (NIC) system works differently from the tax system and for someone with multiple employments or sources of income, it can be all too easy to overpay, writes Jon Dawson, partner at Kingston Smith LLP.

NIC is deducted from employees’ salary through the PAYE payroll system. It is based on bands of income: there is no charge on the first £8,060, 12% on employment income between £8,060 and £43,000, and 2% on amounts above £43,000. Where the combined employments add up to more than £43,000 of income, employees may be overcharged.

It is possible to apply to HMRC for a deferment of future NIC deductions. The application has to be made by each employee, either via the HMRC website or on form CA72A. They must disclose details of all their employments so that HMRC can review the position and send details of any over or under payments. While you cannot make the application for your employees, you can assist them in the process by giving them details of how to apply.

It is also possible to review past years and reclaim over payments. The employee must write to HMRC with details of the NIC paid in the relevant tax years and a P60 form.

Multiple employments do not affect the NIC paid by your company; this still remains an additional cost on top of gross salary. Remember to claim the annual £2,000 employer NIC allowance.