National Insurance Contributions Category M

HMRC have raised awareness of when National Insurance contributions (NICs) category ‘M’ should be used.

Introduced in 2015 to 2016, category ‘M’ grants a reduction on Employer’s Class 1 secondary NICs for employees who are under the age of 21.

Category M no longer applies after an employee reaches the age of 21 and it’s the employee’s age at the time of payment that determines which National Insurance contributions category should be used. For example, if an employee turns 21 during a tax month but is not paid until later in the month then Category M should not be used for that month’s pay.

This reminder is based on insight that suggests employers aren’t changing the National Insurance contributions Category until the month after the employee turns 21.

HMRC urges employers to review their payroll systems and ensure that the correct date of birth is recorded, and any incorrect dates of birth are rectified. This will help reduce any payroll errors in future.

Note that from April HMRC started using GNS messages to contact you if data suggests you need to check the use of the NIC category ‘M’ for your employees.