Paying employees under the age of 21
From the 6 April 2015, if any of your employees are under the age of 21 you may no longer need to pay employer Class 1 secondary National Insurance contributions (NICs) on their earnings.
The rate of employer Class 1 NICs for employees under the age of 21 will be 0% up to the new ‘Upper Secondary Threshold’ (UST) which, for the tax year starting 6 April 2015, will be the same as the Upper Earnings Limit (UEL). Class
1 NICs will however continue to be payable on all earnings above this threshold. The basic rules and calculations of National Insurance including how Class 1 NICs are assessed will not be changed by this measure.
For employees who are at, or over, the age of 16 and under the age of 21 there will be a range of new NI category letters to available. From 6 April 2015, when submitting PAYE information for employees under the age of 21 employers will need to use the new category letter appropriate to the individual.
Seven new National Insurance category letters have been introduced. The most commonly used one will be category M:- Not contracted-out standard rate contributions for employees under 21.
Employers (or their agents) are responsible for ensuring they report the correct category letter. To do this, employers will need to make sure they hold the correct date of birth for employees.