ICB brings you information on the latest update to HMRC booklet CWG2. This is the ‘further guide to PAYE and National Insurance contributions’, a document we refer to in less common payroll situations.
The 2025/26 version was published on 12 February 2025, updated on 06 April 2025 and again on 01 May 2025. We detail the 01 May 2025 update but this is only a correction to information that was incorrect.
3.1.5
This section is crucial for employers as it addresses mistimed payments and the National Insurance Contribution (NICs) calculation:
- If an employee starts in the middle of a pay reference period, for example, the 20th of June and paid on the 25th, the full NICs thresholds are applied (the Lower Earnings Limit, the Primary Threshold, the Secondary threshold etc);
- If person above (who started on June the 20th) is not paid backpay until the July, the NICs calculation must give the full NICs thresholds for each month, i.e. June and July
The above is demonstrated by examples 1 and 2. The CWG2 goes on to say that if a mistimed payment spans two tax years, such as March backpay paid in April, NICs are calculated using the current tax year's rates and thresholds.
This is where the update occurs, as shown in example 3:
- In the CWG2 version dated 06 April 2025, the example said NICs for the March payment (made in April) should be calculated using the rates and thresholds for tax year 2024/25. This was incorrect;
- In the CWG2 version dated 01 May 2025, the example now says NICs for the March payment (made in April) should be calculated using the rates and thresholds for tax year 2025/26. This is correct
For Bookkeepers
It is important to say this is not a change but an update to correct information in the CWG2. We want to point you to HMRC’s National Insurance Manual (NIM) that contains information about mistimed payments:
- NIM08700 – ‘Earnings Periods: Payments not paid on their usual payday: General’;
- NIM08710 – ‘Earnings Periods: Payments not paid on their usual payday: Usual payday & date of payment in same tax year’; and
- NIM08720 – ‘Earnings Periods: Payments not paid on their usual payday: Usual payday & date of payment in different tax years’
Mistimed payments happen and it is important you know what to do (and ensure your software is doing the NICs calculation correctly).
Importantly, always ensure you are referring to the latest version of the CWG2 (dated 01 May 2025).
