The National Insurance letter code is used to determine the rates at which the employer and employee pay National Insurance which is used to fund state pensions, benefits, and the NHS.
Most of your employees will be on the standard letter code A but there are in fact 8 different NI codes to choose from. How confident are you that you have the right letter for your employees? We’ve highlighted the 4 most common mistakes made with National Insurance letter codes…
The letter code M
A commonly missed letter which could save you money. This letter introduced in April 2015 applies to under 21-year olds. The employee will pay national Insurance contributions as normal but as an employer you will not pay NI until their earnings are over £4,167 per month.
The letter code C
This is used for those workers over the State Retirement Age (SPA). This letter means the Employee does not pay national insurance but the employer does contribute. If not used correctly this could lead to some very unhappy employees. If you are using the letter code C remember to check you have proof of age to maintain accuracy.
The letter code X
This letter applies to those who are under the age of 16 or deceased. The letter X means that the employee and employer do not pay any National Insurance contributions.
The letter code H
This is a new letter introduced in April 2016 which applies to those Employees in Apprenticeships. Under the letter code H the Employer does not have to pay any national insurance contributions until earnings go above £4,167 per month.
Want to know what to do if you have the wrong National Insurance letter codes? Check out our blog: https://www.cebackoffice.co.uk/youve-using-wrong-national-insurance-letter-code/