When the average man in the street takes his pay packet home, he finds that his employer has deducted certain taxes and he receives only a net amount after P.A.Y.E and employees national insurance have been subtracted.

For years and years, before I became interested in accountancy, I was totally unaware of a different national insurance beast that was incurred by employers! What we are saying is that I have a salary of say £16000 per annum, the cost to the employer for my services would not be £16000, it would be greater than this amount i.e. the employer would incur the cost of my salary, plus employers N.I..

So how much does employers national insurance cost? Well, below what is known as the “Lower Earnings Limit” of £5715, employers national insurance costs absolutely nothing. Above this level of earnings however, the story is totally different. Employees N.I. (i.e. the N.I. that is deducted from your gross wages) is charged at 11%, however, the poor old employer finds himself paying even more than this and incurs a whopping big bill of 12.8% for earnings above the lower earnings limit of £5715. The employees version of N.I. does have an upper earnings limit above which the rate drops to only 1%, but the poor old employer finds that he has no such luck and the 12.8% rate carries on indefinitely.

Any such N.I. must be paid out to H.M.R.C on a monthly basis. For payments below a certain limit, quarterly payments may be made.

If you employ a nanny for instance, you may find that you have to operate a payroll scheme. In such cases, it may be worthwhile sourcing nanny payroll services in order that your tax can be calculated for you.