NI - does it get refunded at end of year if you pay too much one month?

[centurian]

Getting paid too much in one period can either benefit or hurt depending on the amounts, because the biggest marginal NI rate sits in the middle. The amounts are pro-rated for the period (weekly, monthly), but they are not averaged out for employees.

If you get paid a huge wodge in one week, your marginal rate is 2% - as opposed to a 12% marginal rate if averaged out.

That's why directors are averaged out, because a lot of savvy directors paid their whole salary for a year in a single week.

[WordIsBond]

Getting paid too much in one period can either benefit or hurt depending on the amounts, because the biggest marginal NI rate sits in the middle. The amounts are pro-rated for the period (weekly, monthly), but they are not averaged out for employees.

If you get paid a huge wodge in one week, your marginal rate is 2% - as opposed to a 12% marginal rate if averaged out.

That's why directors are averaged out, because a lot of savvy directors paid their whole salary for a year in a single week.

It benefits the employee, but costs the employer, to do it that way. One of my employees was in a position that we could have done this, I could have paid him twice a year, so I thought about it. But instead of the first £8K being exempt from employer's NI, it would have been the first £300 or so.

I could have reduced his salary to make up for it, he'd have still been ahead, but it would have been complicated and not worth that much.

[psychocandy]

Ah right. NI is paid on anything over £672 a month.

The one month they screwed up and paid her less - £560 a month so no NI was paid. So in effect, £100 ish of the 'allowance' was wasted that month.

So they lumped in onto next months instead and NI was payable then.

By my calculations, it just means that the first £100 would have been NI free if done properly, but in the 2nd month it would have attracted NI. So only £10 or so difference.

Not the point though. Employer still trying to get it through and keep quiet about it.

So back to company point of view. If I pay her a salary as well is this cumulative or is each employment treated separately?

[WordIsBond]

So all this is about £10? Why not give her the first £10 from the next time you file for JSA and forget about it? The employer lost £13.80 through their mistake, BTW.

Note to self: remember this thread when deciding on which ones to expend mental energy in future.

Of general use to other contractors, a salary you pay is cumulative with other employment income in determining NI liabilities.