In this article, I am going to look at National Insurance (NI) category letters, which is an area often overlooked by employers. In my 8 years of running payrolls, I see the same issues around which letter should be assigned to certain employees and so I will cover how and when NI letters should be used.

Why is it important to have the correct National Insurance category letter?

Simple answer, it is for employers to determine the exact amount they and their employees are required to contribute towards National Insurance.

The two most common category letters used are A and C. Letter A will cover the majority of employees. Letter C is a category letter used for employees who are eligible for State Pension. (Always ensure you have proof of age to ensure you are applying the correct category based on age).

Category Letters and what they mean:

A All employees apart from those in groups B, C, H, J, M, V and Z in this table
B Married women and widows entitled to pay reduced National Insurance. This stopped in 1977, but still exists for women who opted-in at the time.
C Employees over the State Pension age
H Apprentices under 25 (more details below)
J Employees who can defer National Insurance because they’re already paying it in another job
M Employees under 21
V Employees who are working in their first job since leaving the armed forces (veterans)
X Employees who do not have to pay National Insurance, for example because they’re under 16.
Z Employees under 21 who can defer National Insurance because they’re already paying it in another job

Even with all this information freely available,  mistakes do happen and so it is important to check your category letters.


One of the most common mistakes I come across is for apprentices. From 6 April 2016, employers have not needed to pay Class 1 National Insurance contributions if the apprentice meets these criteria:

  • is under 25 years old
  • is on an approved UK government apprenticeship standard or framework (these can differ depending on location)
  • earns less than £967 a week (£50,270 a year)

When apprenticeships finish, I have seen too many times to count, employers not changing the National Insurance category letters to meet government guidelines.  Please don’t assume your payroll software automatically amends this as unlike tax codings which can automatically update, NI letters do not.

If you have an apprentice who has finished their apprenticeship and they’re under 21 years of age, you must change the letter code from H to M.

If the apprentice is over 21 and completed their apprenticeship, the letter code must change from H to A.

If an incorrect NI category is selected, it can be difficult to correct the mistake at a later date. You may be charged a penalty for a mistake if you did not take ‘reasonable care’.

If you have used the wrong category letter in previous tax years or you are unsure of what letter to use, you are welcome to email or give our team a call. We can advise how to correct this, which you will need to do to ensure that as an employer, you and your employees have made the correct national insurance contributions.

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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