National Insurance – deadlines and penalties for employers

National Insurance contributions (NICs) are payments made by employees, employers and self-employed people. They help fund certain state benefits, including the State Pension.

The type of National Insurance you pay depends on your employment status and how much you earn or make in profits. There are different classes of National Insurance, with most people paying one of the following:

• Class 1 – paid by employees through PAYE, with employers also making contributions.
• Class 4 – paid by self-employed people whose profits are above the relevant threshold.
• Voluntary Class 2 – available to some self-employed people who want to protect their entitlement to the State Pension and certain other benefits.
• Class 3 – voluntary contributions that may be available if you want to fill gaps in your National Insurance record.

As an employer, you’ll usually deal with Class 1 National Insurance. This means deducting employee National Insurance from wages through PAYE and paying employer National Insurance where it’s due.

As an employer, you’re responsible for paying the Income Tax and National Insurance you’ve deducted from employees’ pay, along with any employer National Insurance due, to HMRC.

Most employers pay HMRC electronically on a monthly basis. Payments must reach HMRC by:

• 22nd of the following tax month

For example, deductions made during the tax month ending 5 June must normally reach HMRC by 22 June if paid electronically.

If your average monthly PAYE and National Insurance bill is less than £1,500, you may be able to arrange to pay quarterly instead of monthly. You must agree this with HMRC.

The quarterly payment deadlines are:

You may be charged a penalty if you do not submit your payroll information/return to HMRC on time. This includes if:

• your Full Payment Submission (FPS) is late
• you do not submit the expected number of Full Payment Submissions
• you do not send an Employer Payment Summary (EPS) when no employees have been paid in a tax month.

For most employers, HMRC will not charge a penalty for the first late submission in a tax year. This exemption does not apply to employers who operate an annual PAYE scheme or in certain other circumstances. New employers also benefit from a short grace period when they first start reporting through PAYE.

The monthly penalty depends on the number of employees in your PAYE scheme:

If a submission remains outstanding for more than three months, HMRC may charge an additional penalty of 5% of the tax and National Insurance that should have been reported on the missing return.

If you do not pay your PAYE and National Insurance liabilities to HMRC by the deadline, you may have to pay interest as well as a late payment penalty.

For employers who pay monthly or quarterly, the first late payment in a tax year does not attract a late payment penalty. After that, the penalty depends on the number of late payments (known as defaults) during the tax year:

If any amount remains unpaid six months after the due date, HMRC may charge an additional penalty of 5% of the outstanding amount. A further 5% penalty may be charged if the amount remains unpaid 12 months after the due date.

If your payroll return contains an inaccuracy that results in too little tax or National Insurance being paid, HMRC may charge a penalty. Whether you are penalised depends on the reason for the error and whether you tell HMRC about it before they discover it.

If you took reasonable care to get your payroll reporting right, you will not normally be charged a penalty, even if you make a mistake.

The table below shows the standard penalty ranges for inaccuracies:

HMRC considers the circumstances of individual cases when calculating penalties. Making an unprompted disclosure and helping HMRC correct the error can reduce the amount of a penalty.

If HMRC charges you a penalty, you’ll receive a notice explaining why the penalty has been charged, how much you owe and how to pay it.

If you disagree with the penalty, you can ask HMRC to review its decision or appeal to an independent tax tribunal. In most cases, you must do this within 30 days of the date on the penalty notice.

You may be able to appeal if:

• you believe the penalty has been charged incorrectly
• you believe the amount of the penalty is wrong
• you had a reasonable excuse for missing a deadline or making an error. HMRC provides guidance on what it considers to be a reasonable excuse.

If you don’t pay a penalty by the due date, HMRC may charge interest on the outstanding amount until it is paid.