NI earnings bands are part of NI calculations, and in some other cases such as eligibility for statutory payments. You can view the NI bands in your software:
An NI number is a unique reference, issued by HMRC to identify the employee's national insurance contribution record.
If an employee doesn't know their NI number, use a temporary NI number and send a NINO Verification Request to HMRC via e-Submissions.
A valid UK NI number includes a prefix of two letters followed by six numbers and a single letter suffix. The only exception to this format is for temporary NI numbers, which have no prefix.
Six digits make up the employee's date of birth, then a suffix of M for male employees and F for female employees. For example, a woman born on 4 August 1973 gets the temporary NI number of 040873 F, with a blank prefix.
Sage 50 Payroll validates any NI number you enter into the software, using the following rules:
| Prefix | Number | Suffix |
- Must be two letters
- The letters D, F, I, Q, U and V can't be either the first or second letters
- The letter O can't be the second letter
| 6 numbers | Letters A, B, C, D, M or F. |
Administrative numbers
HMRC and the Department for Work and (DWP) sometimes use internal reference numbers. These look like NI numbers, and occasionally they can send you one of these instead of the correct NI number.
They aren't valid NI numbers. Contact HMRC if you do receive one to ask for the correct number. Administrative numbers use the following prefixes:
You can also receive a number which has two numbers followed by two letters and further numbers. This is also an internal reference number and isn't a valid NI number.
NI categories
NI categories refer to the contribution table letters under which NI is payable. For example, an employee on NI category A has their NI calculated using the figures in contribution table letter A.
An employee's NI category is dependent upon their circumstances. For example, employees over state pension age are assigned category C and, in specific circumstances, married women or widows can use category B.
For more information about rates and categories, go to gov.uk.
Changing NI categories
If an employee is due to change NI category, for example due to their age, their new category normally applies to the whole month. This isn't affected by the specific date hen typically the new NI category will apply for the whole month regardless of when the NI category change applies.
The employer requires a document proving that the employee is correctly on the new NI category. For example, a CA4140, CF384, passport, or birth certificate for employees who reach state pension age and are due to go onto NI Category C.
You can't change some NI categories mid year, such as moving from NI category A to J. In these scenarios, you typically need to reprocess the employee or director on either A or J for the whole year.
If you’re unsure about any NI category changes, contact HMRC for further guidance.
NI contributions
Sage 50 Payroll calculates NI contributions using the exact percentage method for any process date on or after 6 April 2022. In this calculation, the exact earnings subject to NI are calculate at the relevant NI rates, rather than using HMRC's NI tables.
For any periods with a process date of 5 April 2022 or prior, your software uses the HMRC NI contributions tables to calculate NI for non-directors. The figures used in these tables calculate in steps of £1.00 for weekly paid employees, and £4.00 for monthly paid employees. They calculate at the mid-point of each step using the relevant percentages for that category.
NI calculates differently for directors. For more information, visit our processing directors article.
- Employees under 21 can defer NI because they're already paying it in another job
For category Z, the percentages are as follows:
- Employee:
2% on earnings above the Primary Threshold. - Employer:
13.8% on all earnings above the Upper Earnings Limit / Upper Secondary Threshold.
NI contribution rebates
NI rebates can be due for both employee and employer for employees who ▼ have a contracted out NI category.
Using the exact percentage method, the rebate calculates as follows:
Employer's NI
- Calculate the Secondary Threshold for the relevant pay period minus the Lower Earnings Limit for the relevant period.
- Multiply this figure by the relevant rebate percentage.
Employee's NI
- Calculate the Primary Threshold for the relevant pay period minus the Lower Earnings Limit for the relevant period.
- Multiply this figure by the relevant rebate percentage.
Sometimes the employee's earnings are above the Lower Earnings Limit but below the Secondary Threshold. In this case, the employer receives both the employer's and the employee's rebate.
TIP: