HMRC has updated its National Insurance Manual (NIM33650–NIM33685) to clarify how National Insurance contributions (NICs) apply to internationally mobile employees. The revisions set out how Class 1 NICs attach to earnings, bonuses, and employment-related securities income where duties were performed while the employee was within UK social security legislation, even if payment is made later after the employee has left the UK. The guidance also confirms that where an employee is treated as only partially in the UK for NICs purposes, earnings must be apportioned so that only the UK-related element is subject to Class 1 NICs, with robust records expected to evidence the allocation.
What this article is about: This article explains HMRC’s updated position on NICs for internationally mobile employees. It covers when NICs liabilities arise on earnings, the distinction between when liability is created (when work is earned) and when the obligation to account for NICs occurs (when paid), how mandatory apportionment works for mixed UK/overseas service, and the implications for payroll, bonuses, and employment-related securities. It also sets out the compliance risks and practical steps for UK employers, with a specific focus on SMEs that may have limited in-house mobility and payroll capacity.
Section A: HMRC guidance on internationally mobile employees NICs
HMRC has introduced a new chapter in its National Insurance Manual (NIM33650–NIM33685) clarifying how Class 1 National Insurance contributions apply to internationally mobile employees. The guidance addresses timing mismatches where remuneration is earned while the employee is within UK social security legislation but is paid later, including after the employee has left the UK. It also confirms that where an employee is treated as only partially in the UK for NICs purposes, earnings must be apportioned so that only the UK-related element is brought into Class 1 NICs, supported by robust records.
1. What the updated HMRC manual (NIM33650–NIM33685) covers
The new material explains the interaction between when earnings are earned and when they are paid. HMRC confirms that NICs attach to income linked to UK service performed during a period when the employee was subject to UK social security legislation, regardless of the employee’s location at the time of payment. This aligns NIC treatment with long-standing income tax principles for cross-border employment and reduces uncertainty in mobility cases involving deferred remuneration and incentives.
2. Key principles confirmed by HMRC
- Earnings are subject to NICs when they are earned. Liability is tied to the period of UK social security coverage in which the duties were performed.
- The obligation to pay Class 1 NICs arises when the earnings are paid. Payroll must account for Class 1 NICs at the payment event, even if the employee is no longer within UK legislation at that date.
This distinction is critical. The NICs liability is determined by the service period, but the timing for deduction and remittance is the payment date. Employers must therefore identify the UK-related portion of earnings at source and ensure payroll captures the liability when payment is made.
3. Impact on bonuses, deferred income, and securities income
- Cash bonuses: Awards covering UK performance periods remain within Class 1 NICs even if paid after the employee relocates overseas.
- Deferred remuneration: Remuneration intentionally delayed to future years must be reviewed to identify the UK service element and brought into Class 1 NICs on payment.
- Employment-related securities: Income from employment-related securities or options that is taxed as earnings (for example under ITEPA 2003 rules) follows the same principles and requires allocation to UK service where applicable.
HMRC expects employers to identify and evidence the UK element of such payments and apply Class 1 NICs accordingly. This creates tracking and compliance requirements for payroll, reward, and global mobility teams, particularly where employees move between multiple jurisdictions.
Section A Summary: HMRC’s manual changes confirm that where duties were performed while the employee was within UK social security legislation, related earnings remain within Class 1 NICs even if paid later after departure from the UK. Employers must distinguish liability (linked to the service period) from the obligation to account (triggered on payment) and evidence any required apportionment for mixed UK/overseas service.
Section B: When NICs are due on internationally mobile employees
The updated HMRC guidance sets out how Class 1 NICs apply when earnings are linked to UK work but paid later, and how employers should deal with periods of partial UK coverage. This guidance is especially relevant to employees on secondments, those with deferred bonuses, and participants in share incentive schemes.
1. Rules for earnings linked to UK work but paid later
Where an employee was within UK social security legislation at the time the duties were carried out, Class 1 NICs remain chargeable on those earnings, even if payment is made after the employee has left the UK. For example, if an employee works in the UK during 2025 and relocates abroad before receiving a 2026 bonus, the portion of that bonus relating to the UK period remains subject to NICs.
This ensures that NIC liabilities reflect the location of service rather than the timing of payment, closing potential gaps and preventing avoidance through timing mismatches.
2. Treatment where employees are only partially in the UK for NICs purposes (apportionment)
Where an employee is treated as being only partially within the UK social security system during the relevant period, earnings must be apportioned. In practice:
- The UK-related portion of income is subject to Class 1 NICs.
- The overseas portion is excluded from UK NICs liability.
Apportionment is mandatory and based on the periods of UK social security liability, not simply on time worked. Employers must therefore maintain accurate records of service periods, calculations, and allocation methodologies to withstand HMRC scrutiny.
3. Examples: secondments, share awards, and timing mismatches
- Secondments: An employee seconded to the UK for six months and then transferred abroad may still owe UK NICs on a later bonus if part of the award relates to UK service.
- Share awards: Options exercised or restricted stock units vesting after an employee leaves the UK must be reviewed to determine what portion of the award relates to UK duties.
- Timing mismatches: Payments linked to historic UK service, even years later, remain within Class 1 NICs unless apportioned to reflect non-UK service periods.
Section B Summary: NICs liabilities are linked to when the work was performed and whether the employee was within UK social security coverage at that time. Apportionment is required for mixed service periods, and employers must hold robust records to evidence how earnings have been allocated. HMRC will expect clear documentation to support compliance.
Section C: Employer compliance obligations
HMRC’s revised guidance highlights the critical compliance responsibilities for employers with internationally mobile employees. Payroll accuracy, record-keeping, and evidence of apportionment are central to meeting these obligations. For many organisations, this requires strengthening systems and processes to ensure liabilities are captured correctly and in line with UK legislation.
1. Payroll reporting and tracking accrued earnings
Employers must distinguish between when earnings were accrued and when they are paid. Payroll systems must be able to track these two events separately, ensuring that Class 1 NICs are calculated based on the UK service period and deducted at the time of payment. This is particularly important where deferred bonuses, share schemes, or incentive packages span multiple years and jurisdictions.
2. Handling apportionment and cross-border complexity
When an employee’s service includes both UK and overseas periods, employers must apply apportionment to ensure only the UK portion is subject to NICs. Compliance requires:
- Detailed records of the employee’s service periods in the UK and abroad.
- Clear allocation methodologies showing how the UK-related portion of earnings was determined.
- Evidence of calculations retained to demonstrate compliance if challenged by HMRC.
Without such records, employers risk HMRC rejecting apportionment and seeking NICs on the full payment.
3. Risks of non-compliance: penalties, arrears, reputational issues
If NICs are underpaid, employers face multiple risks:
- Financial exposure: HMRC can recover arrears of NICs plus statutory interest.
- Penalties: Additional charges may be imposed for careless or deliberate failures to account for NICs correctly.
- Reputational risk: Organisations may suffer reputational damage if failures are exposed during HMRC compliance checks, which can cover multiple historic tax years.
As NIC liabilities rest with the employer, they cannot normally be transferred to the employee. This underlines the need for proactive compliance and investment in payroll and mobility processes.
Section C Summary: Employers are expected to apply HMRC’s updated NIC rules rigorously, with systems capable of tracking accruals and apportionment. Failure to comply can lead to arrears, interest, penalties, and reputational harm. Employers should therefore review payroll processes and record-keeping to mitigate exposure.
Section D: What does this mean for me? (SME focus)
HMRC’s updated guidance applies to all employers, but small and medium-sized enterprises (SMEs) are particularly exposed due to more limited in-house payroll and mobility resources. Even a single internationally mobile employee can create NIC liabilities that need to be managed carefully to avoid errors and penalties.
1. Why SMEs are particularly exposed to these changes
SMEs often lack specialist mobility teams or complex payroll systems. However, they still carry full responsibility for NIC compliance. An employee on secondment, a director with overseas duties, or a bonus paid after relocation can all trigger Class 1 NIC liabilities. Without proactive management, SMEs risk unexpected NIC arrears, interest, and penalties that can disproportionately affect their finances.
2. Practical steps for SME payroll and HR teams
SMEs can strengthen compliance by taking the following actions:
- Review mobility arrangements: Identify current or recent internationally mobile employees and assess whether their earnings involve UK service periods.
- Audit incentive schemes: Check whether deferred bonuses, share awards, or other long-term incentives cover UK service, even if paid after departure.
- Strengthen payroll readiness: Ensure payroll systems can track earnings to service periods and apply apportionment correctly at the point of payment.
- Maintain documentation: Keep evidence showing when duties were performed, how apportionment was calculated, and what proportion of payments relate to UK service.
3. When to seek specialist advice and support
SMEs should consider external support where:
- Employees are seconded abroad or into the UK from overseas.
- Bonus, deferred, or securities income is involved, particularly in share schemes.
- Payroll systems are not currently configured to manage apportionment or track service periods accurately.
Professional advice can help SMEs identify risks, implement compliant processes, and manage HMRC queries effectively, reducing the likelihood of penalties and arrears.
Section D Summary: SMEs face the same NIC obligations as larger employers but often have fewer resources to manage them. By reviewing mobility arrangements, auditing pay structures, improving payroll processes, and seeking advice where necessary, SMEs can minimise exposure and meet HMRC requirements with confidence.
FAQs
Do NICs apply if an employee has already left the UK?
Yes. If the earnings relate to duties performed during a period when the employee was within UK social security legislation, Class 1 NICs remain due. The obligation to pay arises when the earnings are paid, even if the employee is no longer in the UK at that time.
How should employers apportion NICs for partial UK work?
Apportionment is mandatory where an employee’s duties span UK and overseas service. Employers must calculate the UK-related portion of earnings based on periods of UK social security liability and apply Class 1 NICs to that portion. Records of the methodology and calculations must be retained.
Are share plans and bonuses treated the same for NIC purposes?
Yes. HMRC confirms that cash bonuses, deferred income, and employment-related securities or options taxable as earnings all follow the same timing principles. NICs liability attaches to the UK service period, and the obligation to account arises at the time of payment.
What records should SMEs keep to prove compliance?
Employers should retain detailed documentation, including:
- Evidence of when work was performed and the employee’s UK coverage status.
- How much of the earnings relate to UK duties.
- Apportionment methodologies and supporting calculations.
This evidence will be critical to demonstrate compliance in the event of an HMRC enquiry.
Conclusion
HMRC’s updated guidance on National Insurance contributions for internationally mobile employees provides important clarity on how liabilities should be managed where earnings are paid after the work has been performed. The fundamental principle is that Class 1 NICs attach to remuneration earned during periods of UK social security coverage, regardless of when the payment is made or whether the employee remains in the UK at that time. Where earnings span UK and overseas service, apportionment is mandatory, and employers must retain evidence of how calculations were made.
For employers, this means payroll and compliance processes must be able to track earnings to the relevant service periods and apply Class 1 NICs at the point of payment. SMEs face heightened challenges due to limited resources but are equally responsible for compliance. HMRC can recover arrears, charge interest, and impose penalties for underpayment, with compliance reviews potentially covering multiple years.
Employers should take proactive steps to review mobility policies, audit incentive arrangements, and maintain robust documentation. Where complex issues such as share schemes or cross-border assignments arise, obtaining specialist advice is strongly recommended. The message from HMRC is clear: timing mismatches do not exempt employers from NIC liabilities, and proactive compliance is essential.
Glossary
| Term | Meaning |
|---|---|
| Class 1 NICs | National Insurance contributions payable by employees and employers on earnings from employment. |
| Internationally mobile employees | Workers who move between the UK and overseas jurisdictions in the course of their employment, including secondees and expatriates. |
| Apportionment | The allocation of earnings between UK and overseas service periods to determine the correct NICs liability. |
| Securities income | Employment-related income derived from shares, share options, or other securities that is treated as taxable earnings under ITEPA 2003. |
| Deferred income | Remuneration earned in one period but paid at a later date, such as bonuses or incentive awards. |
Useful Links
| Resource | Link |
|---|---|
| HMRC National Insurance Manual (NIM33650–NIM33685) | gov.uk |
| HMRC: National Insurance if you go abroad | gov.uk |
| HMRC: Globally mobile employees and PAYE | gov.uk |
| Taxoo: National Insurance guide 2025/26 | taxoo.co.uk |
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.
