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Wednesday 28 September 2016
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I am not payroll-trained. Please can you provide info on NI and small-business levels?

Question in full:

Like many practice managers, I am not payroll-trained – please could you provide information on national insurance, small business levels and when you exceed these – for example, the £45,000 NI target for SMP compensation payments and other items of this nature. I know of practices that have been caught out with these things, and it would be useful to know in advance so you can check before being contacted by the tax man.

Answer:

National insurance can be a complex area even for full-time payroll specialists, so it is quite understandable that some practice managers may be apprehensive when it comes to administering their payroll while managing the rest of the practice at the same time.

Your enquiry suggests that you have a practical grasp of the weekly basics of national insurance and are looking for some signposts relating to some of the potential pitfalls. There is a lot of national insurance guidance available on the internet, particularly on the HMRC website. Some of this guidance is quite detailed, so it is not feasible to condense all of this information here, but hopefully we can help point you in the right direction in a couple of useful areas.

On the subject of Statutory Maternity Pay (SMP), HMRC have a comprehensive helpbook available on their website: www.hmrc.gov.uk/helpsheets/e15.pdf. Included here are more details relating to the fact that that if an employer's annual Class 1 NIC liability is £45,000 or less, then they are entitled to:

  • 100% of the SMP back.
  • An additional amount as compensation for the NICs paid on the SMP, which in 2011–12 is 3%.

If the employer's annual Class 1 NIC liability is over £45,000, then a reduced amount of the SMP is refundable (92% in 2011/12).

Another useful link is to the HMRC Employer Helpbook for Statutory Sick Pay (SSP) at www.hmrc.gov.uk/helpsheets/e14.pdf. This includes some more detail about how an employer may be able to claim back some of the SSP under the Percentage Threshold Scheme. The guidelines for 2011/12 are that if the total SSP paid in a month exceeds 13% of the Gross Class 1 (employer's and employee's) NIC liability for that month, then the employer should be able to recover the difference. This scheme applies for all sizes of business.

Please feel free to contact us if you would like any further advice on payroll-related issues.