0 A Guide to Employee Tax and NI

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Getting your employee tax and national insurance right can save you money and a nasty letter from the tax man, as well as fines and even court orders. Some employers do not understand the basics of employee tax and NI which then results in them overpaying their staff, or perhaps even underpaying them. This guide aims to help you better understand what is required of you, as well as how you can save money and avoid those nasty fines.

The Basics of National Insurance for Employers and Self Employed Workers

As an employer it is your duty to pay National Insurance Contributions (NIC) on the earnings your employees make from your business. This does not just cover their basic salary or cash, NIC must also be paid on benefits such as car allowances, holiday pay and so on.

If you are self employed, you will also have to pay your own National Insurance as well as income tax, which is worked out separately.

 There are 6 different classes of National Insurance, each one depends on your earnings, whether you are self employed or an employer and the benefits you can expect throughout the tax year. For more information on which class you fall into it is best to speak to an expert in chartered accounting.

When you, as an employer, operate your normal payroll system such as PAYE (Pay as You Earn) the NIC will be calculated at the same time. This only applies to your employee earnings however,