National Insurance Contributions Flashcards
(24 cards)
what national insurance is payable by a self employed person?
- Class 2
- Class 4
what national insurance is paid by an employee?
Class 1 primary (cash earnings eg. salary, bonus, vouchers)
what national insurance is paid by an employer?
- Class one secondary (cash earnings eg. salary, bonus, vouchers)
- Class 1A (benefits)
what is the annual profit limits for paying Class 2 NICs?
£12,570
who pays Class 2 NICs and when is it due?
- payable by sole traders and partners
- payable through self assessment by 31st January following the end of the tax year ( 31st January 2025)
what is Class 4 NICs paid on and when is it due?
- Paid on tax adjusted trading profits assessed for income tax
- Payable via payments on account/balancing payment with income tax
when must a trader register with HMRC for Class 4 NIC and income tax?
5th October following the end of the tax year
What is a payment on account?
self employed make installments only on income tax and Class 4 NICs not on capital gains or class 2 NICs
when are payments of account due?
- 1st payment on account - 31 January in tax year (31/01/24)
- 2nd payment on account - 31 July following end of tax year (31/7/24)
how is POA calculated?
50% of previous tax year payable by self assessment
POA is not required when?
if amount of tax paid in previous year was <£1000 or <20% of total income tax and class 4 liability
when is balancing payment due?
due on 31st January following end of tax year and includes unpaid income tax, unpaid self employed nics and capital gains tax
eg 31/01/25 and also includes POA from this current tax year
when is penalty due and on what?
penalty on balancing payments and interest on POA/ balancing payments
what NIC do employees pay?
pay class 1 primary contributions on cash earnings and vouchers for goods of services
what NIC to employers pay?
class one secondary which include cash earnings and vouchers
when are class one contributions due?
- 19th of each month
- extended deadline to 22nd for month electronic payment
what is the rule for apprentices and young people?
have a lower class 1 secondary contribution
what is the employment allowance?
- reduces class 1 secondary NIC liability for the employer
- £5000 per annum
what if the employment liability is less than the allowance?
employer pays no secondary class 1 NIC
the employment allowance is not available to employers which….
- companies with a single director and no other employees
- those with a class 1 secondary NIC liability > £100,000 in the previous tax year
what is class 1A NIC?
- paid by employers on value of taxable benefits
- value of assessable benefit x 13.8%
can employment allowance be offset against Class 1A NIC?
No
when is Class 1A NIC paid?
paid annually by 19 July (22 July if paid electronically) following the end of the tax year
