Chapter 8 - National Insurance Contributions

    Cards (13)

    • 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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