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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: UK Tax
Satisfied Customers: 3693
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based)
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Hi. If I employ someone for a basic salary of £20,000 per

Resolved Question:

Hi.

If I employ someone for a basic salary of £20,000 per year. How does national insurance work?

Someone has told me the amount is 14%. If that is correct, is that 14% on top of the £20k or do I just take 14% off their basic salary and pay it but out of their wages?

If you know of any other costs as an employer that you think would help me to. Know about wild be greatly appreciated.
Submitted: 1 year ago.
Category: UK Tax
Expert:  taxadvisor.uk replied 1 year ago.

Hello, if you have any questions or need further clarification after reading my answer please let me know.

 

Thank you for your question...

 

The employer pays employer's NI contribution on earnings above £7,692 at 13.8%. This cost is over and above the salary and not taken out of employee's wages...

 

Based on a yearly salary of £20,000 the amployee NI would be £1,470.24 and employer's NI would be £1,697.95.

 

Assuming the personal allowance is 9,440 employee's net earnings would be

Gross £20,000.00

Tax due £2,112.00

Nat Ins £1,470.24

Total deductions £3,582.24

net earnings £16,417.76

 

There are no other payroll related costs that you should be aware of.

Sick pay, holiday pay would be covered within the terms of engagement.

As an employer you would have to consider employers liability insurance.

 

 

If you need more information please let me know before you rate my service.

 

I hope this is helpful and answers your question. If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get paid for it.

 

I am available for any follow up questions you may have, and you can use the reply button to post your follow up questions to the page.

Customer: replied 1 year ago.
Hey.I am still a little confused.If I pay someone a salary of £20,000 then from their wages I would pay their income tax and their portion of their NI contribution leaving them with £16,400 and then out of my pocket I would have to also pay around £1700 for their NI.This would mean that any person I employed on a £20k salary would actually cost a real value of around £21.7k + insurance?If this is correct then I think I understand.Also am I correct in saying also that next April there will be a reduction of the fee by £2k meaning that the above example will result in a £0 tax bill from next April?
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply...

 

Employer NI contribution is an additional cost. The cost to the company is the salary and employers NIC.

 

There is an employment allowance of £2,000 from Apr 2014. This would bring your employer NIC to nil.

 

I hope this is helpful and answers your question. If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get paid for it.

 

taxadvisor.uk, Chartered Certified Accountant
Category: UK Tax
Satisfied Customers: 3693
Experience: FCCA - over 35 years experience as a qualified accountant (UK based)
taxadvisor.uk and 3 other UK Tax Specialists are ready to help you

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