Seminar 7

Question 1

NIC’s = ?

Answer 1

national insurance contributions

Question 2

who pays NIC’s?

Answer 2

self employed people
employers
employees

Question 3

what are NICs used for?

Answer 3

used by the government to fund state benefits

e.g., jobseekers allowance & state pensions

Question 4

when do people receive national insurance numbers?

Answer 4

when they turn 16

Question 5

who pay class 1 NICs?

Answer 5

employees and their employers as a percentage of employee’s earnings

Question 6

who pay class 1A NICs?

Answer 6

employers on the taxable benefit for employees

Question 7

who pay class 2 NICs?

Answer 7

self employed people pay a flat rate

Question 8

who pay class 4 NICs?

Answer 8

self-employed people as a percentage of their taxable profits

Question 9

who are primary/secondary in the payment of class 1/1A NIC’s?

Answer 9

primary = employees
secondary = employers

Question 10

how are class 1 contributions paid?

Answer 10

under the PAYE system

Question 11

how are class 1A contributions paid?

Answer 11

electronically by 22nd July following the tax year to which they relate

Question 12

how are class 2 contributions paid?

Answer 12

under the self-assessment system

Question 13

how are class 4 contributions paid?

Answer 13

under the self-assessment system

Question 14

at what age are employees applicable for class 1 NICs?

Answer 14

between 16 and 66 (state pension age)

employers still pay NICs on employees over 66, but don’t pay NICs on employees under 16

Question 15

what elements of income are class 1 NICs calculated on?

Answer 15

monetary earnings

e.g., salary, commission, bonuses, vouchers

Question 16

contribution period = ?

Answer 16

the period for which the employee is paid

e.g., if employer is paid monthly, NIC is calculated monthly

Question 17

are NICs calculated on non-cumulative basis?

Answer 17

yes

NICs are calculated on non-cumulative basis, so only earnings from the current contribution period are considered when calculating amount payable

Question 18

how are NICs for company directors assessed?

Answer 18

annual basis

Question 19

at what percentage do employees primary class 1 contributions?

Answer 19

12% for the earnings between 12,570 per year and 50,270 per year

2% on any earnings above the 50,270

Question 20

what is the primary threshold for class 1 NICs?

Answer 20

12,570 per year, 1048 per month, 242 per week

Question 21

what is the upper earnings limit for class 1 NICs?

Answer 21

50,270 per year, 4189 per month, 967 per week

Question 22

if employee receives additional payments, how do you calculate the NICs?

Answer 22

in relation to weekly or monthly

because the earnings aren’t the same over the whole year

Question 23

at what percentage are secondary contributions payable by the employers?

Answer 23

13.8% on all earnings exceeding the secondary threshold

secondary class 1 contributions aren’t payable by employees, only employers

Question 24

what is the secondary threshold for class 1 NICs?

Answer 24

9,100 per year, 758 per month, 175 per week

Question 25

what is the upper secondary threshold?

Answer 25

50,270 per year, 4189 per month, 967 per week

employers don’t have to pay for earnings up to the upper secondary threshold for employees under 21 or apprentices under 25

Question 26

can employers get an employment allowance?

Answer 26

yes

5,000 per annum is deducted from their secondary class 1 NICs liability

Question 27

if employer’s total secondary class 1 NIC liability for all employees is less than 5,000, what happens?

Answer 27

employer pays no secondary class 1 NIC for the year

Question 28

who isn’t employment allowance available to?

Answer 28

isn’t available to companies with no employees

isn’t available to businesses with over 100,000 NIC liability in the previous year

Question 29

should i assume that employment allowance is applicable to secondary class 1 NICs?

Answer 29

yes

Question 30

are benefits in kind included in class 1 NICs?

Answer 30

no, they’re part of class 1A NICs

employers pay class 1A NICs on benefits in kind at 13.8%

Question 31

vouchers are subject to…

Answer 31

class 1

not class 1A

because it’s classed as monetary income

Question 32

how do class 2 NICs work?

Answer 32

between 16 (minimum age) and 66 (state pension age) pay a flat rate of £3.15 per week of self-employment

class 2 NICs aren’t required if profits for the year are less than small profits threshold of 12,570

paid through self-assessment system

Question 33

how do class 4 contributions work?

Answer 33

self employed people pay class 4 NICs in relation to their profits

9% of taxable profits between 12,570 and 50,270

2% of taxable profits above 50,270

individuals must pay class 4 contributions if aged 16 or over at the start of the tax year and cease to be liable if aged 66 at the start of the year

collected alongside income tax liability for the year