ESM8225 - Basic principles: how to work out the deemed payment: step eight - example

This example is also reproduced at ESM8235 using a step by step guide.

Ms G is a worker whose service company has earned income from a relevant engagement. The service company paid her a salary of £3,000 during the year. The amount at Step Seven is £30,000. This produces the following figures:

x    =    Earnings to date    3,000               

y    =    The amount at Step Seven    30,000

a    =    The secondary Class 1 NICs threshold    5,000

b    =    The secondary Class 1 NICs percentage rate    15

Using the formula:

((y-(a-x))x100/(100+b))+(a-x),

the deemed payment is equal to

((30,000-(5,000-3,000))*100/(100+15))+(5,000-3,000)

= 30,000-2,000*100/115+2,000

= £26,348

The secondary Class 1 NICs payable in respect of the deemed payment are £3,652

Note - 2025-26 NICs rates used in example calculation.