What's new?
Feature Overview
This release enhances the way National Insurance is calculated for company directors who have multiple NI categories within a single tax year.
There are two methods for calculating NI for a director; the standard (or cumulative) method, which is commonly used by directors who are paid irregularly, and the alternative (or non-cumulative) method, which is more common for directors who are paid every period.
Paycircle enhances payroll accuracy by seamlessly managing NIC calculations for directors, whether using the standard or alternative method. Our latest upgrade ensures effortless handling of multiple NI categories with a structured priority system, precise recalculations, and intelligent threshold reallocations—delivering compliance, accuracy, and a hassle-free payroll experience—every time.
Feature Highlights
Support for Multiple NI Categories: Directors with multiple NI categories during the tax year now have accurate NICs and threshold reallocations based on a priority order.
Recalculation of NICs: NICs and NI thresholds are recalculated in the final period of the tax year or when a director leaves the company, ensuring a seamless and accurate process.
Priority Order for NI Categories: A structured priority system is applied to ensure that the correct NI thresholds are used across categories, with the following priority order: I, E, B, V, Z, M, H, L, D, J, F, N, A, S, K, C, X.
How It Works
Priority order for NI categories
Since HMRC does not provide a defined priority order, we have implemented the following sequence: I E B V Z M H L D J F N A S K C X
This ensures a consistent and logical order when recalculating NI contributions.
Alternative method Directors NI calculation
Each period, NI is calculated based on the NI category active at the time.
In the final period of the tax year, the system:
Recalculates total NI based on annual thresholds.
Applies the correct priority order for NI categories.
Generates one UserPaymentNI record per NI category the director has held.
Standard method Directors NI calculation
NI is calculated cumulatively across all earnings in the tax year.
A single UserPaymentNI record is created for each period until a category change occurs.
After a category change, separate records are generated for each category in every period.
The 'Preview Pay Statement' for directors from their action cog in the 'Current period will show combined NICs and thresholds for all categories.
Payroll Reporting enhancements
Payroll reports show the director’s current NI category but combine the NICs and thresholds for all categories.
Year-to-date reports, when using the '(Split by NI Category)' columns, will display a breakdown of NICs and NI thresholds for each NI category. Please note, however, that the 'Gross Pay for NI' column is not split by category and will show the total figure across all categories.
Scenario: A director is on NI category A for 8 months, then reaches State Pension Age and switches to category C for the remaining 4 months.
In Month 12, NI category A takes priority over C when recalculating NICs.
NI thresholds and contributions are reallocated accordingly.
Payroll reports will display the director’s current NI category but will show the combined NIC values across all applicable NI categories.
Impact
Ensures directors pay the correct NIC amounts when they move between NI categories.
Avoids duplication of NI thresholds, preventing over- or underpayment.
Improves accuracy in payroll reporting for companies managing director NI contributions.
How to access the update
These improvements will be live on 14 February 🎉✨