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What National Insurance Category Letters to Use for Employees: A Practical Guide

  • Shepherd Partnership
  • Jun 15
  • 2 min read

When running payroll in the UK, choosing the correct National Insurance (NI) category letter is very important. If the wrong category is used, it can lead to incorrect deductions and problems with HM Revenue and Customs (HMRC).


What are NI Category Letters for?


NI category letters tell you:


1)     How much NI the employee pays

2)     How much NI the employer pays


The correct category depends on the employee’s age and circumstances.


The Most Common NI Categories:

Category

Employee Group

Employers Pay

Employees Pay

A

Age 21 to SPA*

15% above ST**

8% above PT*** then 2% above UEL****

C

Over SPA

15% above ST

Zero

H

Apprentice under 25

0 up to UEL then 15%

8% above PT then 2% above UEL

M

Age 16 to 20

0 up to UEL then 15%

8% above PT then 2% above UEL

X

Under 16

Zero

Zero

 *SPA - State pension age – to use HMRC’s calculator please follow the link: https://www.gov.uk/state-pension-age 

**ST - secondary threshold - currently £417/month

***PT - primary threshold - currently £1,048/month

****UEL - upper earnings limit - currently £4,189/month

 

There are other less common NI categories relating to freeports, investment zones, veterans, NI deferment and married women.


These categories are for specific circumstances with specific rules.

 


How to choose the right NI Category Letter for your employee:


You firstly need to ensure that you have proof of age of all employees. Then ask yourself:


  1. How old is the employee?

  2. Do any special rules apply?

  3. Is your employee under 21 and an apprentice? If so, use category H - apprentice under 25.

 

Common Mistakes


  • Not changing the category when moving age groups

  • Not using M for employees under 21 - or not using Apprentice H if both

  • Using category H if employee is not on an approved apprenticeship

  • Ignoring letters received from HM Revenue and Customs


Final Thoughts


NI category letters are a small part of payroll, but it is vital that the correct letter is used. Getting them right helps you stay compliant and avoid costly mistakes.


If you need help with your payroll, please get in touch with Anne, our payroll manager, who will be happy to help.

 

 
 
 

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