NIM01280 | Class 1 structural overview from 6 April 2009: changes to the deferment process from 6 April 2009

There have been no structural changes to the deferment process since April 2009. For more information about the deferment process See NIM01180.

From 6 April 2009 the Upper Accrual Point (UAP) was introduced as part of the Pension Act 2008 and the NICs Act 2009 and is the point at which calculation of State Second Pension (S2P) ends. The UAP was set at the 2008 to 2009 UEL and will be frozen until S2P becomes payable at a flat rate. The UAP impacts contracted out employment from 2009 to 2010, as the employee (and Employer) will pay NICs at the contracted out rate (10.4%) to the UAP and at the standard rate (12%) from the UAP to the UEL .

There have been changes to the rates of NICs from April 2011 and for the 2011 to 2012 tax year onwards, an employee who is granted deferment will be required to pay:

• Class 1 NICs at the relevant percentage rates on all earnings above the Primary Threshold in the non deferred employments

• Class 1 NICs at a rate of 2% (from 6 April 2011) on all earnings above the Primary Threshold in any deferred employment.

From 6 April 2012, Contracting out of the additional State Pension on a Defined Contribution basis was abolished.

Employers whose employees are granted deferment were advised to deduct Class 1 primary NICs at a rate of 2% on all earnings above the Primary Threshold and were required to report the payments on forms P14 and P35.

Any underpayment of the 2% will remain the responsibility of the employer. Any other underpayment arising because the anticipated earnings in the non deferred employments did not materialise will remain the responsibility of the employee.

For the 2022 to 2023 tax year only the additional primary percentage was 3.25% for payments of earnings made before 6 November 2022 – see NIM01600 for more information.