2 - NI Contributions

Question 1

4 factors that determine NI contributions

Answer 1

EARL

Employment status
Age
Residence status
Level of earnings

Question 2

Who pays class 1 NI contributions?

Answer 2

Employees, employers, directors

Question 3

Primary and secondary class 1 NI contributions

Answer 3

Primary - paid by employees

Secondary - paid by employers

Question 4

On what time frame basis are NI contributions calculated?

Answer 4

Weekly

Question 5

Primary NI class 1 average charge rate for employees and directors

Answer 5

Hybrid
Nil rate - 0% - upto £229pw
main band - 12.73% - £229pw to £967pw
additional rate - 2.73% - over £967pw

Question 6

NI class 1 for employers hybrid rate

Answer 6

Hybrid:
0% upto £175pw
14.53% - Over £175pw (No limit)

Question 7

NI class 1 contributions for employers employment allowance and who is this not available to?

Answer 7

£5k

Not available to companies where director is sole employee or business with class 1 secondary NI bill of £100k+ in previous year

Question 8

What is the rate of NI class 1 tax for an employer on benefits offered to employees?

Answer 8

Flat rate of 13.8%

Question 9

How do HMRC check NI contribution payments are accurate?

Answer 9

Carry out random checks on companies

Question 10

Penalties for late payment of NI

Answer 10

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

Question 11

What is the HMRC filing penalty for NI contributions?

Answer 11

£100 - £400

Question 12

Fundementsl principal within EEA? And where is this usually paid to place of birth or place of work?

Answer 12

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

Question 13

Class 2 & 4 NI contributions are for who?

Answer 13

Self employed

Question 14

Class 2 NI rules

Answer 14

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

Question 15

Class 4 NI rules

Answer 15

No NI due upto £11,908

£11,908 - £50,270 rate of 9.73%

Over £50,270 rate of 2.73%

Question 16

How many instalments is class 4 NI paid over?

Answer 16

3

Question 17

How many weeks a self employed person be resident in the UK to have to make class 2 & class 4 NI contributions?

Answer 17

Class 2 - 26 out of 52 weeks before contribution week

Class 4 - must be definitely resident in UK

Question 18

If someone is trying to depress income over several companies e.g. using a conglomerate how do HMRC treat this?

Answer 18

If there is a clear business link between companies then earnings are aggregated as if they are from one employment

Question 19

Max. contributions for NI classes

Answer 19

Class 1 - none
Class 2 & 4 - calculated

Question 20

Class 3 contribution purpose

Answer 20

For when class 1 or 2 contributions are insufficient

Question 21

NI class 3 rules

Answer 21

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

Question 22

Class 3 contribution rate

Answer 22

£15.85 per week

Question 23

Which is more expensive class 3 or class 2 NI contributions?

Answer 23

Class 3

Question 24

How often are class 3 contributions made?

Answer 24

Quarterly on demand or via monthly direct debit