National Insurance

Question 1

What are the 4 Classes of contribution?

Answer 1

• Class 1 employee
• Class 1 employer’s
• Class 1A
• Class. 4

Question 2

Class 1 employee basis of assessment

Answer 2

Employee’s earnings being in excess

Question 3

Class 1 Employer’s basis of assessment

Answer 3

Employer’s earnings GIVEN to staff being in excess

Question 4

Class 1A basis of assessment

Answer 4

Employer’s taxable benefits given to employees

Question 5

Class 4 basis of assessment

Answer 5

Self-employed tax-adjusted trading profits being in excess.

Question 6

What is included in gross earnings?

Answer 6

INCLUDES:
- Any form of pay including sick pay.
- tips from emmploeyer
DOES NOT INCLUDE:
- Tips received directly from customers
- Non CASH benefits like a car

Question 7

What ages are Class 1 contributions for?

Answer 7

Ages 16 or over until reached state pension age.

Question 8

How often is class 1 calculated?

Answer 8

Calculated whenever employee receives pay.
If their earnings fluctuate, the contribution should be calculated on a periods basis, like accruals.

Question 9

Are contributions a deductible expense?

Answer 9

Class 1 employee: no not deductible when calculating income tax liability

Class 1 employer: Yes Deductible expense when calculating tax adjusted trading profits

Question 10

What is the rule to company directors?

Answer 10

They are treated as though their salary is annual no matter if they are paid weekly or monthly.

Question 11

How are NIC’s paid?

Answer 11

• Paid by the employer to HMRC after deducting from the employee’s account.
• Due on the 19th or 22nd (electronically) of each month

Question 12

The NIC employment allowance

Answer 12

£5,000 relief from class 1 employer payments.
Can only be claimed if total class 1 employer’s NIC < £100,000 in the previous tax year.