2 April 2015    |    Taxation, Payroll

National Insurance for under 21’s

Key facts

From 6 April 2015 employers with employees under 21 years old will no longer have to pay Class 1 secondary National Insurance contributions (NICs) on earnings up to the Upper Secondary Threshold (UST) for those employees.

The zero rate won’t apply to Class 1A or Class 1B NICs. Class 1 secondary NICs will apply if the employee is earning above the UST.

Details of the new rates

payroll ni computationsEmployees must be aged over 16 but under 21 years old for the new category letters to apply.

The current rate of secondary Class 1 NICs for the tax year 2014 to 2015 is 13.8% on earnings above the Secondary Threshold (ST) of £153 per week – or its equivalent for pay periods that are longer than 1 week.

From 6 April 2015 that rate is reduced to 0% for those employees who are under the age of 21 with earnings between the ST and the UST. The value of the UST for the tax year 2015 to 2016 will be the same as the Upper Earnings Limit (UEL). There’s no:

New category letters

If you employ someone aged over 16 but under 21 you’ll have to choose 1 of the 7 new National Insurance categories when assessing their secondary NICs. It’s the employer’s responsibility to ensure the correct category letter has been applied based on the age and circumstances of the employee.

The 7 categories are:

M – not contracted-out standard rate contributions
Z – not contracted-out deferred rate contributions
Y – mariners not contracted-out standard rate contributions
P – mariners not contracted-out deferred rate contributions
V – mariners contracted-out salary related contributions
I – contracted-out salary related standard rate contributions
K – contracted-out salary related deferred rate contributions

Three of the new letters (V, I and K) will be removed in April 2016 in line with the ending of ‘contracted-out’ status in relation to salary-related occupational pension schemes.

The structure of National Insurance will continue, but incorporate the changes introduced. There are no changes to the rules which set out how Class 1 NICs are assessed. Bonus pay, holiday pay and other payments will continue to follow the same calculation principles as they do now.

How to apply this

If we run your payroll, we will apply this automatically for new and existing employees, so there is nothing for you to worry about.

If you manage your own payroll then you need to identify those employees who qualify, and then apply the correct new NI table category.  Your payroll software will need to be fully up to date.

If you need help processing your payroll, or want us to manage your payroll for you, then contact Sue for advice and guidance.


The information provided is for general information purposes only.

Legislation and details may have changed since this was written.  The text may not include all matters that are relevant to your individual situation.

You should not make decisions, or refrain from making decisions, without taking further professional advice about your specific circumstances.

Trinity House
31 Lynedoch St.
G3 6EF

71 King Street

49-50 Bayhead

Website by Haiwyre