2 - National Insurance Contributions (D, E & F)

Question 1

What is the purpose of class 3 NICs.

Answer 1

They are voluntary contributions that can be made to fill the gaps in an individual’s contribution record.

Question 2

What is the class 3 voluntary contribution rate?

Answer 2

£17.45 per week (£907.40 per year)

Question 3

John reaches SPA 66 in December 2022, can he pay class 3 NICs in this tax year?

Answer 3

No - class 3 contributions cannot be paid in the tax year in which a person reaches SPA or any subsequent year.

Question 4

Payment of class 3 NICs is subject to a residence condition. Which 3 rules must be met?

Answer 4

– be resident in the UK throughout the tax year concerned;
OR
– have arrived during the tax year and been previously liable to pay class 1 or 2 NICs;
OR
– have arrived during the tax year and been resident for 26 weeks.

Question 5

How many years of class 3 contributions can you top up voluntarily?

Answer 5

Class 3 contributions can be paid up to six years after the tax years to which they relate

Question 6

How many qualifying years do you need to be entitled to the full state pension?

Answer 6

People retiring require 35 years’ contributions to qualify for the full new State Pension.

Question 7

Why are NICs a significant liability for employers?

Answer 7

No upper limit

Question 8

What is the ‘annual maxima’ of class 1 + class 2 NICs that can be paid for someone who is both employed and self-employed, to avoid excessive liabilty?

Answer 8

£4,524

Question 9

What is the ‘annual maxima’ of class 2 + class 4 NICs that can be paid for someone who is self-employed, to avoid excessive liability?

Answer 9

£3,572.40

Question 10

Where someone is both employed and self-employed, there is a separate annual limit on class 4 NICs payable at the main rate. What are class 4 NICs limited to?

Answer 10

Class 4 NICs are limited to the maximum class 4 NICs at the UEL (£3,393.00) less the main rate class 1 NICs paid.