On 04 August 2020, HMRC published their National Insurance Contributions Guidance for Software Developers for tax year 2020/21. These are described as ‘Technical specifications giving National Insurance calculation methods and guidance for payroll software developers’.
The guidance covers the following:
- NICs information for tax year to which they are relevant (i.e. starting 06 April 2020)
- Completing the payroll record (2020 / 21)
- Description of the differences between calculating NICs using the tables and exact percentage method
- Rules for rounding
- NICs calculation formulae (exact percentage method)
- Directors NICs calculation formula
- NICs calculation formula (tables method)
There is information about the current rates and thresholds in appendix 1 and a lot of worked examples appendix 2.
The Differences
The main difference, apart from the changing rates and thresholds, is the addition of a section on Class 1A NICs on Termination Awards and Sporting Testimonial payments.
Another difference is the timing of publication. This is usually made available to software developers before the start of the tax year.