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R3 > Ch 2 - NICs > Flashcards

Ch 2 - NICs Flashcards

(52 cards)

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1
Q

NICS are only payable on what kind of income?

A

Earned income

ignore dividend/rental income/savings income

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2
Q

What classes of NICs do self-employed pay?

A

Class 2 (flat) & class 4 (%)

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3
Q

Class 1 NICs are only applicable to who?

A

Employed individuals

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4
Q

Are contributions made into an occupational pension scheme liable to NIC?

A

No

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5
Q

If shares are readily convertible into cash and have been acquired through an unapproved share option scheme, will they be liable to NIC?

A

Yes, payable on shares

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6
Q

What is the Lower Earnings Limit (LEL)?

A

The minimum level of earnings for an employee to be entitled to contributory State benefits

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7
Q

What is the Primary Contribution Threshold (employee)?

A

Weekly £184
Monthly £797
Yearly £9,569

Employees pay NICs above this amount

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8
Q

What is the Secondary Contribution Threshold (employer)?

A

Weekly £170
Monthly £737
Yearly £8,840

Employers pay NICs above this amount

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9
Q

What is the Upper Secondary Threshold (UST)/Apprentice Upper Secondary Threshold (AUST)?

A

Weekly £967
Monthly £4,189
Yearly £50,270

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10
Q

What is the rate of Class 1 NICs for an employee?

A
  • Have nothing to pay if they earn below the primary threshold
  • 12% on earnings above the primary threshold up to the UEL
  • 2% on earnings above the UEL (additional primary percentage)
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11
Q

What is the rate of Class 1 NICS for employers?

A
  • Have nothing to pay up to the secondary threshold

* 13.8% on anything above the secondary threshold, with no upper limit

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12
Q

What is the rate of Class 1 NICS for apprentices under 25 or employees under 21?

A
  • Nothing to pay up to the UST/AUST (£967 p/week)

- 13.8% on anything above

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13
Q

What is the employment allowance for employers?

A

£4000

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14
Q

When is the employment allowance withdrawn?

A
  • Director is sole employee

- If an employer had contributions > £100,000 in prev year

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15
Q

What is the Married Women Reduced Rate for NICs?

A
  • For earnings of £184-£967 (UEL) pw, the rate is reduced to 5.85%
  • Anything above £967 pw is 2%
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16
Q

What was the cut off date for Married Women Reduced Rate?

A

6th April 1977

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17
Q

When is the Married Women’s Reduced Rate revoked?

A
  • Divorce
  • Remarriage
  • Earnings less than LEL for 2 years in a row with no self employed earnings
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18
Q

When are Class 1A contributions paid?

A

paid by employers in relation to most benefits in kind

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19
Q

What is the rate of Class 1A NICs?

A

Flat rate of 13.8%

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20
Q

Trivial benefits costing what, are also free of NICs?

A

£50 or less

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21
Q

How are Class 1 NICs collected for employees?

Study These Flashcards
A

Collected through PAYE

22
Q

Who is responsible for the calculation of Class 1 NICs?

23
Q

When are Class 1A benefits collected/due?

Study These Flashcards
A

Due on 22nd of July of the end of the tax year to which they relate (19th of July if not electronic)

24
Q

What form must Class 1A benefits be declared on?

Study These Flashcards
A

P11D (submitted by 6th July)

25
What are the penalties for the late payment of Class 1 NICs?
* No penalty for the first late payment in a tax year, unless it is more than 6 months late * Penalties start at 1% of the late amount and increases depending on the amount of late payments in the same tax year * 5% will be charged for payments more than 6 months late and a further 5% if the payment is still not received after 12 months * any late payment will be charged interest daily
26
What are the penalties for the late submission of Class 1 NICs?
* There is no penalty for the first late submission during the tax year, but for any further late submissions, a late-filing charge of £100-£400 is applied depending on the number of employees * If a submission is 3 months late, an additional 5% can be charged
27
EEA nationals should only make social security contributions where?
In one state | normally same country as employee contributions
28
If a UK worker is temporarily in EEA/Norway, can ask HMRC to issue certificate to allow UK contributions for how many years?
2 years (3 in Norway)
29
If a UK national goes to work abroad for a UK employer, HMRC will continue to collect NICs for how long?
52 weeks
30
How are NICs collected for a director?
The total earnings within a tax year are used
31
If a director takes dividends rather than salary, is this liable to NICs?
No
32
What is the minimum that a director must pay themselves?
Minimum national living wage
33
Which workers will be treated as employees for NIC purposes (not necessarily income tax purposes)?
- Domestic workers and office cleaners - Agency workers - Lecturers and instructors - Ministers of religion Workers in the film and television industry (except freelance and casual workers who are self-employed) - Labour only subcontractors
34
What is the NIC treatment of a sub-postmaster?
- Class 1 deducted from salary | - Class 2 + 4 liable on trading profit
35
What is the NIC treatment of Share Fisherman?
* If a fisherman is self-employed and shares the profits of a fishing boat registered in Great Britain, they are liable to class 2 and 4 NICs, even though they work outside the UK * A special rate of £3.70 per week for class 2 NICs applies, as they will qualify for new style Jobseeker’s Allowance
36
What is a Class 3 Contribution?
Voluntary to fill in gaps in contribution record (paid at a flat rate of £15.40 per week)
37
How long after a tax year can Class 3 NICs be paid?
6 years
38
How can companies can reduce their NIC liability?
Pay out dividends as opposed to salary | not a deductible expense for corporation tax purposes, unlike salary
39
What salary means the employee has no NIC liability but still receives entitlement to state benefits?
Between £6,240 (LEL) and £9,569 (Primary Contribution Threshold)
40
What is the rate of Class 2 Contributions?
• Charged at a flat weekly rate of £3.05 when the individual earns over the small profits threshold of £6,515
41
How are Class 2 contributions paid?
Paid via the self-assessment system and due on the following 31st January after the end of the tax year
42
What is the threshold for Class 4 contributions?
Lower annual limit (£9,569)
43
What are the rates and thresholds for Class 4 contributions?
Between £9,569 - £50,270 = 9% | Above £50,270 - 2%
44
How are Class 4 contributions paid?
Paid via the self-assessment system, however it is paid the same time as income tax with 2 payments on account (31st January during the tax year and 31st of July after the tax year) and a balancing payment the following 31st January
45
How can an individuals who become self-employed outside the UK maintain their contribution record for State benefits purposes?
Opt to pay Class 2s
46
What are the residency conditions for Class 3s?
- The individual must have been a resident in the UK throughout that tax year; or - Arrived in the UK during the tax year and has previously been liable for class 1 or class 2 NICs; or - Arrived in the UK during the tax year and has been resident for 26 weeks
47
How is a director taxed?
As an employee (12% then 2%)
48
How does deferment work if an individual works for two unconnected companies?
1) One employer is instructed to deduct employees NICs at only 2% on annual earnings above £9568 2. Calculate Annual Maximum limit (£4884.24) + NICs payable at 2% in excess of £40,702 - NICs actually paid = Payable after end of tax year Page 88 CII RevisionBook
49
If a person is employed and self employed, what are their Class 4 Contributions limited to?
(Max Class 4 NICs at UEL*) - (Class 1 NICs actually paid) *(£50270-£9568) x 9% = £3663.18
50
Childcare benefits are free of NICs up to what amount
£55 p/week
51
Are NICs payable on unapproved share schemes?
Yes
52
Are NICs payable on approved share schemes?
No

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