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Principles of Tax
Chapter 8 - National Insurance Contributions
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Tilly Chadwick
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Self Employed Pays:
Class
2
-
flat rate
Class
4
- `based on
taxable trading profits
Employee Pays:
Class
1 Primary
- cash earnings, salary, bonus and vouchers
Employer Pays:
Class
1 Secondary
- based on cash earnings
Class
1A
- based on benefits
Class 2:
Paid by
Sole Traders
and
Partners
£3.45
per week
Paid through
self assessment system
Trader must register with
HMRC
for Class
2 NIC
purposes by
31 Jan
following
tax year end
Class 4:
Calculated on tax
adjusted
trading
profits
round to nearest pound at each stage of working
Payments on accounts:
Payments made for
income tax
and class
4.
Each POA is calculated based on
50
% of the PY tax payable.
No POA is required if amount of tax paid in PY is less than:
£1000
20%
of total income tax and class 4
Balancing payments:
Due on the
31st
Jan following the end of the tax year for:
unpaid
income
tax
unpaid
self-employed
NICs
capital
gains tax
Late payments:
Penalty is charged on
late payment
of
balancing payments
, but payments on accounts are charged
interest.
Interest is calculated using
sandwich dates.
Class 1
Primary
:
Paid by
employees
based on
cash earnings
calculated based on
weekly
or
monthly pay
payable by
PAYE
by the
19th
of each month (
22nd
for electronic)
Can pay
quarterly
if monthly PAYE is below
£1500
Class 1 Secondary:
paid by
employers
based on
cash
earnings
employers with over 250 employees must pay electronically
Apprentice and Young people NIC:
To encourage employers to take on
young
people and apprentices, class 1 secondary contributions are
lower
in relation to these groups.
Employment
allowance:
Employers receive an allowance to reduce their total
class
1
secondary
contribution.
£5000
per employer
If the employers liability is less than the allowance - they pay
no
class 1 secondary.
It is not available to:
companies with a
single
director and no other
employees
those with a class 1 secondary liability
greater
that £100,
000
in
PY
Class
1A
:
Paid by employers based on the value of
taxable
benefits.
Value of assessable benefit x 13.8%
Employment
allowance
cannot offset Class 1A
Paid annually by
19th
July
(22nd July is electronically) following the end of the tax year
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