National Insurance

Question 1

class 1 primary?

Answer 1

paid by employee on cash earnings

Question 2

class 1 secondary?

Answer 2

paid by employer on employee cash earnings

Question 3

class 1A?

Answer 3

employer pays on employee benefits in kind

Question 4

class 1B?

Answer 4

employer pays on PAYE settlement agreement

employer pays all tax on the specific benefit

Question 5

what ages apply to class 1 NIC?

Answer 5

employees aged between 16 and state pension age

Question 6

class 1 NIC is paid on…

Answer 6

gross pay before any allowable deductions

Question 7

cash earnings?

Answer 7

includes cash, vouchers and payments above SMRS

Question 8

class 1 primary NIC rates?

Answer 8

0% up to primary threshold

8% between primary threshold and upper earnings limit

2% above upper earnings limit

Question 9

primary threshold?

Answer 9

12,570 per year
1,048 per month
242 per week

Question 10

upper earnings limit?

Answer 10

50,270 per year
4,189 per month
967 per week

Question 11

directors always pay NIC on..

Answer 11

annual basis

Question 12

employees always pay NIC on…

Answer 12

basis of the way they are paid (e.g., weekly, monthly, annually)

Question 13

disposable income?

Answer 13

take someone’s earnings and subtract all the tax that they pay

salary less NIC less IT = net disposable income

Question 14

disposable net income?

Answer 14

salary - NIC - income tax

Question 15

marginal tax rate?

Answer 15

the rate of tax one will pay on the next £ they earn

e.g., 45% IT and 8% NIC, 45% + 8% = 53%

Question 16

effective tax rate?

Answer 16

tax paid / income earned = ETR%

Question 17

who pays class 1 secondary and class 1A NIC?

Answer 17

employers

Question 18

cash earnings include…

Answer 18

salary/bonus/vouchers

write off of a beneficial loan

emplpoyee personal bills paid by employer

SMRS

profit element of a general allowance

Question 19

benefits liable to class 1A include…

Answer 19

car, van and fuel benefits

beneficial loan interest

phone rental & private calls (not mobile phone)

private medical insurance & taxable benefits

relocation expenses more than 8,000

Question 20

where benefits are exempt for income tax…

Answer 20

there are usually no NICs

Question 21

client entertaining is…

Answer 21

disallowable

Question 22

how do class 1 secondary NIC work?

Answer 22

deduct 9,100 from the balance (primary threshold)

everything in excess of primary threshold is taxed at 13.8%

Question 23

primary threshold?

Answer 23

9,100 for class 1 secondary

Question 24

tax rate for class 1 secondary NIC?

Answer 24

13.8%

Question 25

flat rate taxable for vans?

Answer 25

3,960

Question 26

how are class 1A NICs treated?

Answer 26

tax all at 13.8% no primary threshold

Question 27

employment allowance?

Answer 27

not available to employers with total secondary class 1 liability of 100,000 in previous year employment allowance is 5,000

Question 28

does the 100,000 limit for employment allowance qualification apply to groups?

Answer 28

yes, it applies to a whole group - not subsidiaries

Question 29

PAYE settlement agreement (PSA)?

Answer 29

can be used by an employer to settle any PAYE and NICs due to HMRC on certain expenses/benefits in relation to an employee employer pays tax on a particular benefit on employee's behalf

Question 30

how do you handle class 1B NICs?

Answer 30

gross is up by 100/80 for BRB taxpayer 100/60 for HRB taxpayer 100/55 for ARB taxpayer then multiply by 13.8% and it's payable by employer

Question 31

class 2 NIC?

Answer 31

3.45 per week

Question 32

what NIC do self-employed people pay?

Answer 32

class 2 & class 4

Question 33

can employees deduct the class 1, class 1A and class 1B contributions they pay on behalf of their employees?

Answer 33

yes, they're deductible expenses

Question 34

how do class 4 NIC works?

Answer 34

6% between bottom and upper threshold (50,270-12,570) 2% on anything above 50,270

Question 35

what is the due date for 24/25?

Answer 35

1st instalment - 31/01/2025 2nd instalment - 31/07/2027 balancing payment - 31/01/2026

Question 36

how are instalments paid?

Answer 36

instalments for 24/25 will be: 50% of tax bill in PY 50% of tax bill in PY balance of tax bill in CY - tax paid e.g., PY tax bill = 10,000, CY tax bill = 12,000 e.g., CY instalments = 5,000, 5,000, balancing payment of 2,000

Question 37

if you believe your tax bill will be less this year than last year...

Answer 37

you can elect to reduce your PA

Question 38

what happens in reduced POA elections are made negligently or fraudulently?

Answer 38

penalties arise

Question 39

if actual tax liability is higher than estimate on reduced POA election...

Answer 39

interest will be charged on difference between the POAs actually paid and the lower of: - the reduced POA plus 50% of balancing payment - the amount which would've been payable had no election for reduction been made

Question 40

employment allowance?

Answer 40

5,000 per year for employers who have an NIC liability of less than 100,000 in prior year

Question 41

flat fee for van benefit?

Answer 41

3,960

Question 42

employees under 21 and apprentices under 25...

Answer 42

employers only pay NIC on their earnings over the upper secondary limit (50,270)

Question 43

are class 1 primary payable for individuals over the state pension age?

Answer 43

no

Question 44

are class 1 secondary payable for individuals over the state pension age?

Answer 44

yes

Question 45

are class 2 allowances optional or compulsory?

Answer 45

optional