2 - NI Contributions Flashcards
4 factors that determine NI contributions
EARL
Employment status
Age
Residence status
Level of earnings
Who pays class 1 NI contributions?
Employees, employers, directors
Primary and secondary class 1 NI contributions
Primary - paid by employees
Secondary - paid by employers
On what time frame basis are NI contributions calculated?
Weekly
Primary NI class 1 average charge rate for employees and directors
Hybrid
Nil rate - 0% - upto £229pw
main band - 12.73% - £229pw to £967pw
additional rate - 2.73% - over £967pw
NI class 1 for employers hybrid rate
Hybrid:
0% upto £175pw
14.53% - Over £175pw (No limit)
NI class 1 contributions for employers employment allowance and who is this not available to?
£5k
Not available to companies where director is sole employee or business with class 1 secondary NI bill of £100k+ in previous year
What is the rate of NI class 1 tax for an employer on benefits offered to employees?
Flat rate of 13.8%
How do HMRC check NI contribution payments are accurate?
Carry out random checks on companies
Penalties for late payment of NI
1st late payment is no charge
After 1st late payment the penalties are 1% - 5% of amount outstanding on number of late payments within the tax yr
Daily interest is also charged
What is the HMRC filing penalty for NI contributions?
£100 - £400
Fundementsl principal within EEA? And where is this usually paid to place of birth or place of work?
Individual who is a national of an EEA state should pay social security within one state.
Usually paid to state which work within unless working in several countries at one time then usually home state
Class 2 & 4 NI contributions are for who?
Self employed
Class 2 NI rules
If profits above £6,725 but less than £11,908 then NI will be paid for
If profits over £11,908 then NI charged at rate of £3.15 per week that was self employed
Class 4 NI rules
No NI due upto £11,908
£11,908 - £50,270 rate of 9.73%
Over £50,270 rate of 2.73%
How many instalments is class 4 NI paid over?
3
How many weeks a self employed person be resident in the UK to have to make class 2 & class 4 NI contributions?
Class 2 - 26 out of 52 weeks before contribution week
Class 4 - must be definitely resident in UK
If someone is trying to depress income over several companies e.g. using a conglomerate how do HMRC treat this?
If there is a clear business link between companies then earnings are aggregated as if they are from one employment
Max. contributions for NI classes
Class 1 - none
Class 2 & 4 - calculated
Class 3 contribution purpose
For when class 1 or 2 contributions are insufficient
NI class 3 rules
Can be paid upto 6yrs after tax period
Can only be paid if insufficient class 1 or 2 contributions
Be resident in UK through concerned tax year for 26 weeks
Class 3 contribution rate
£15.85 per week
Which is more expensive class 3 or class 2 NI contributions?
Class 3
How often are class 3 contributions made?
Quarterly on demand or via monthly direct debit
