Newsletter issue - May 09.
We are now into the new tax year and you may be recording the first salary payments for 2009/10. When you calculate the amount of NI due don't forget to record how much pay for each employee falls above the new Upper Accruals Point (UAP). This is set at £3,337 per month, just below the Upper Earnings Limit (UEL) of £3,656 per month.
For employees who are not in a contracted-out pension scheme, the UAP makes no difference to the amount of NICs they pay. The reduced rate of NICs paid by contracted-out employees now stops at the UAP rather than at the higher UEL, so these employees who earn more than £3337 per month will pay more NICs in 2009/10 than in 2008/09.
There is also a hidden penalty for all employees. Previously earnings above the UEL did not count towards state benefit entitlements, now all earnings above the UAP will not count for state benefits. The UAP has been frozen at £3337 per month (£770 per week) and will not be increased by inflation, so the amount of contributions that is counted for state benefits is capped from now on.