B - Income Tax & NIC Liabilities

Question 1

What is income tax?

Answer 1

This is a tax payable by all individuals in the UK on their income.
All individuals are assessed separately
Persons in a married or civil partnership income is split either 50/50 or by actual owner ship.

Question 2

What income is exempt from income tax?

Answer 2

Income from Individual savings accounts (ISA)
Interest from NS&I Certificates
Winnings - Note interest /Income subsequently earned will likely be taxable .

Question 3

How is the basic income tax proforma laid out?

Answer 3

1 column for each type of income
End column totals each row
Rows for each specific income
Total for gross income then reliefs applied to give net income.
Personal allowance (tax code) - this is deducted against NSI, SI then DI in order. And may be reduced if adjusted net income is higher than £100k
Taxable income - income on which tax liability will be calculated.

Question 4

What is Adjusted Net income?

Answer 4

ANI - Net income less gross gift aid donations and gross pension contributions.

Question 5

How is a reduction to personal allowance calculated?

Answer 5

Basic personal allowance
Less (ANI-100,000)*50%
To give allowable personal allowance.

Question 6

What are the income tax rates?

Answer 6

Basic rate - <= £37,500 20%
Higher rate - £37501 - £150,000 40%
Additional Rate - >150,001 45%

Question 7

What is marriage allowance?

Answer 7

One partner/spouse and transfer 1/10th of full personal allowance for the year.
This reduces the transferring spouses personal allowance
And reduces the receiving spouses tax liability at the basic rate.
For PA of 12,500 the reduction in liability is £250.

Question 8

What reliefs are there against total income?

Answer 8

Qualifying interest payments, where loan is to buy:
P&M for use in a partnership
Shares in an employee owned trading company.
To invest in a partnership.
The relief is deduction of interest paid from total income.

Question 9

How does charitable giving affect income tax?

Answer 9

Gift aid Scheme.
The gross gift aid amount is taken in to account when adjusting personal allowance as part of ANI.
It is not deducted from Net income.
The donation is assumed to be net of 20% tax so will serve to adjust the tax band threshold for higher rate tax payers by the amount of the gift.

Question 10

What is the child benefit tax charge?

Answer 10

Child Benefit is a tax free payment from the Government.
If a taxpayer or partner has ANI of >£100k a charge will apply.
Charge is 1% of benefit for each £100 of ANI over £50K.

Question 11

How is the tax status of an individual determined?

Answer 11

There are there types of test which must be applied in chronological order to assess an individuals tax status:
Automatic overseas Test
Automatic UK Test
Sufficient ties test.

Question 12

What are the different types of Savings (Investment) income?

Answer 12

Bank & Building society income
Interest from NS&I investments
Interest from Gilt edged stock
Interest from quoted company loan stock.

Interest received from ISA’s and NS&I certificates is exempt.

Question 13

What are the tax rates applied to savings income?

Answer 13

Taxed after NSI, band applied is based on total taxable income.
Starting rate 0% - £1 - £5000 (inc taxable NSI)
Basic Rate 20% - £1-£37,500
Higher rate 40% - £37501 - 150,000
Additional rate 45% - over £150,001

Question 14

What is the savings income nil rate band?

Answer 14

This is an amount of savings income that is taxed at 0%
£1000 for basic rate tax payers
£500 for higher rate tax payers
Not available for additional rate tax payers.
Use of the Nil rate band reduces the remaining basic or higher rate band.

Question 15

How is dividend income taxed?

Answer 15

After NSI and SI, bands are applied based on total income
Basic rate £1-£37,500 7.5%
Higher rate £37,500-£150,00 32.5%
Additional rate > £150,001 38.1%

Question 16

What is the dividend nil rate band?

Answer 16

Available to all tax payers
0% on the first £2000 for all tax payers.
As with SNRB will reduce the remaining basic and higher rate band.

Question 17

What is an individual savings account?

Answer 17

Also known as an ISA
All interest income from this is tax exempt
Disposals of the investment are exempt from CGT.
20/21 investment limit is £20,000

Question 18

What is the accrued income scheme?

Answer 18

Overrides interest being taxed on receipt (standard)
Used to avoid converting taxable interest income to non taxable Capital gains.
Is only applied if the nominal value is >£5000
The interest accrued (but not received) up to the disposal date is calculated, this is recognised as taxable income, sales proceeds are reduced by the same amount.

Question 19

What may be taken in to account for married couples with tax planning?

Answer 19

Use of marriage allowance
Transfer of income generating assets.
Joint ownership of shares to maximise nil rate
Joint ownership of deposit accounts
Split joint income according to actual ownership.

Question 20

What is property income?

Answer 20

Income arising from the letting of commercial and residential property.
Calculated on a cash basis by default.
Income less expenses actually arising.
Income and expenses from different properties are pooled for calculations.
Watch out for holiday lets.

Question 21

What expenses can be claimed against property income?

Answer 21

Expenses must relate wholly and exclusively to the letting of the property.
If property is occupied by the land lord these expenses cannot be claimed.

Question 22

How is interest in relation to property income dealt with?

Answer 22

Where this is an individuals income (not a company)
Not deducted from income
Relief given as basic rate on income tax
Basic rate restriction applies to 100%of costs.
This applies to Interest and incidental costs on loans to finance
Acquisition of Equipment of Lets and improvements/repairs to properties.

Question 23

How is capital expenditure dealt with

Answer 23

Where income is dealt with on a cash basis there is generally deemed to be no distinction between RevEx and CapEx.
Exceptions:-
CArs - Can claim capital allowances or approved mileage allowance.
Replacement Domestic items relief - Can claim cost of replacing items less any proceeds from sale of item. Only available with like for like replacements.

Question 24

Can income be dealt with on an accruals basis?

Answer 24

Only if specified.
usually an opt in or if property income receipts exceed £150,000.
In this case:-
Rental income and expenses are assessed on an accruals basis.
Unpaid rent is a deductible expenses - Impairment loss.
CapEx is dealt with through capital allowances.
Treatment for finance costs and Replacement domestic items relief remains the same.

Question 25

What is rent a room relief?

Answer 25

Where a landlord lets a room(s) in their main residence property income up to the annual limit is exempt. 2020/21 limit = £7,500. Gross rent <= £7,500 Income is exempt unless the tax payer elects not to take the relief to take credit for a loss. Gross rent > £7,500, choose the lower of rent a room relief or std cash based calculation. Where 2+ rooms are being rented the relief is split to £3,750 per person.

Question 26

What is meant by furnished holiday lettings?

Answer 26

To qualify as a FHL a property must: Be let furnished. Let on a commercial basis - intention to make profits. Available to the public generally for not less than 210 days per year. Actually let for at least 105 days per year. Not let for long term occupation >155 days.

Question 27

How is income from Furnished holiday lets deal with?

Answer 27

Assessed as property income on a cash basis. | Any losses can only be offset against the same FHA business.

Question 28

What benefits and reliefs are available on FHL's

Answer 28

Profits are deemed relevant earnings for personal pension scheme contributions. Plant and machinery can be dealt with on a cash or accruals basis. Treated as a business asset for capital gains tax relief.

Question 29

What is Premium on Grant of a Short lease?

Answer 29

For a lease of less than 51 years part of the premium is considered property income. Property income element is calculated as: Premium x (51-length of lease granted)/50

Question 30

How is income recognised as being from Employment not self Employed?

Answer 30

An employee will generally have a contract of service where a self employed person would be contracted to provide a service.

Question 31

How do we recognise if an employment contract exists

Answer 31

HIS CHORES Hours - specific hours at fixed times or places Integration - carry out activities that are integral to the business Source of work - typically receive a single source of income Control - Employer controls how work is carried out Holidays - entitled to paid leave & sickness Obligation - employer to offer work & employee to carry it out Risk\reward - employees don't suffer risk or reward Equipment - Provided by employer Substitutes - Employees must perform work them selves.

Question 32

How is the calculation of employment income pro forma laid out

Answer 32

``` This is assessed on a receipts basis Salary bonus/commission benefits reimbursed ezpemses cash vouchers Less; allowable deductions expenses pension contributions professional subs charitable donations travel allowance use of own car ```

Question 33

When are payments deemed to have been received

Answer 33

On the earlier of; actual payment date date individual became entitled to the payment Unless director then this is the earliest of; actual paument date date director became entitled to payment date earnings are credited to accounts if the earnings are determined before the end of the period - last day of period after the period - date earnings ate determined.

Question 34

what are allowable expenses for employment income?

Answer 34

``` professional subscriptions - relating to the job charitable donations - payroll giving contributions to occupational pension capital allowances travel expenses ```

Question 35

when is travel between home and work place an allowable expense;

Answer 35

when the employee has no normal place of work or normally works from home or has a temporary work place - only if for less than 24 months.

Question 36

What are approved mileage allowance payments

Answer 36

HMRC statutory rates - 45p a mile for 1st 10,000, then 25p per mile. if mileage allowance payments are received from the employer; to AMA no benefit or deduction over AMA excess is taxable benefit under AMA short fall is an allowable deduction

Question 37

Are there any benefits which are exempt from income tax

Answer 37

Trivial benefits - less than £50 and not cash or vouchers provided in recognition of services employers pension contributions use of free or subsidised canteen - available to all employees provision of parking 1 mobile phone per employee up to £150 per head for social events non cash gifts from third parties work place nurseries or child care buses and use of bikes relocation and removal expenses up to £8000 work related training personal expenses when working away from home payment towards cost of working from home up to £500 pa for return to work medical loans with a beneficial interest rate provided loan is less than £10,000. provision of work related accommodation

Question 38

What are the general rules for benefits

Answer 38

value of a benefit for tax purposes is the cost of providing the benefit normally reduced by any contribution employee makes to cost will be time apportioned if only available for part of the year NB benefits provided to each employee are notified on P11D after end of tax year

Question 39

How is company car benefit calculated

Answer 39

value of Car = list price + cost of any optional extras less maximum £5000 employee contribution. benefit = value of car x CO2 emissions %

Question 40

what is the CO2 emissions % for diesel and petrol cars

Answer 40

51-54 g/km - 13% 55 g/km - 14 % over 55 g/km - 14% plus 1% for ever 5g/km over 55 to a maximum value of 37% additionally for diesels that don't meet RED2 there is a 4% supplement.

Question 41

what are the CO2 emission % for hybrids?

Answer 41

this is based on the electric range of the vehicle and will be between 0 and 12% fully electric cars will be 0%

Question 42

what is private fuel benefit

Answer 42

nominal rate of £24500 x CO2% for the vehicle. | there is no reduction given for employee contributions.

Question 43

what about private use of company vans

Answer 43

benefit is charged at a rate of £3490 (2020/21) | fuel benefit os charged at £666.

Question 44

what other general rules apply to vehicle benefits

Answer 44

no benefit is chargeable for genuine pool cars employee contribution can only be deducted from car benefit not from fuel benefit. If the vehicle is not available for a period greater than 30 days then benefit should be time apportioned. if the vehicle is available for shared private use then apportion benefit on a fair basis.

Question 45

What about assets provided for employee use

Answer 45

no benefit is chargeable if use is insignificant or exempt if the asset is owned by the employer then the benefit is 20% of the market value of the asset if the asset is rented then the benefit is the higher of annual value or rent paid by employer. Employee contributions are deducted in both cases.

Question 46

How are gifts of assets to employees dealt with

Answer 46

if gifted immediately - the taxable benefit is the cost of the asset to the employer; if previously lent then gifted - the benefit is the higher of the market value when gifted or market value when first provided less benefit already taxed. if the asset is a car, van or bike benefit is always current market value.

Question 47

When is the provision of living accommodation not taxable

Answer 47

When the provision is job related; necessary for performance of duties enable better performance of duties & customarily provided provided for security reasons.

Question 48

How is the benefit for non job related accommodation calculated

Answer 48

taxable benefit is based on the annual value of the accommodation; if owned - annual value plus extra charge if rented - the higher of annual value and rent paid by employer . extra charge = (cost - £75k)x official rate of interest. Cost - original purchase value plus any subsequent capital improvements up to the start of the tax year. if the property has been owned for more than 6 years the cost will be market value when the employee moved in plus capital improvements to the start of the tax year.

Question 49

What if the employer is paying living expenses

Answer 49

in this case a further benefit will arise: related living expenses - cost to enployer providing furniture - 20% x cost of furniture when first provided. this benefit is restricted to 10% of employees net earnings if the accommodation is job related. Net earnings - taxable employment income less living accommodation benefits.

Question 50

what is a beneficial loan

Answer 50

loans made to employee by employer below official rate of interest. The benefit is calculated in one of two ways; average method - default where no election has been made. intrest due on the average loan value outstanding between start and end of year. Strict method - benefit based on actual monthly balance outstanding. Both methods calculate the interest due, benefit is difference between this and interest paid.

Question 51

what else should we be aware of for beneficial loans

Answer 51

they are not deemed to be a benefit when loan value is below £10,000 through out the year. written off loan amounts are treated as a benefit in the tax year of the write off.

Question 52

what is the basis of assessment for self employed income

Answer 52

current year basis - 12 month accounting period ending in the tax year.

Question 53

what are the badges of trade?

Answer 53

Subject matter of the transaction ownership - how long has the item been owned for frequency - how often are similar transactions carried out improvements - has work been carried out to the goods reason for sale - i.e forced in order to raise cash. motive - is the intention to raise a profit?

Question 54

what are the additional factors for badges of trade?

Answer 54

source of finance to purchase - if funded by a loan that will only be repaid once the asset is sold this should be considered trade acquisition method - gifts or inheritance less likely to be trade similar trading transactions - transactions relating to existing trade.

Question 55

How is the pro forma for adjusting accounting profit laid out?

Answer 55

start with Net profit per the accounts add: disallowed expenses £x expenditure allowable for tax purposes 0 taxable income not in accounts £x less: expenditure not charged in accounts non trading income included in accounts capital allowances assessable income.

Question 56

How do we generally identify disallowable expenses ?

Answer 56

Not wholly, and exclusively for the purpose of trade. this may be due to; remote - to remote from the purpose of trade duality - has more than one purpose one which is not related to the trade.

Question 57

What are appropriations?

Answer 57

``` withdrawal of funds from the business by its owner. these may be; salary drawings private element of expenses in accounts excess payments to family. ```

Question 58

How is CapEx dealt with in self employment income?

Answer 58

``` expenditure relating to capital assets is disallowable this will include; depreciation loss on disposal of an asset improvement or replacement of an asset cost of purchase any other capex related ```

Question 59

how are car leasing costs dealt with?

Answer 59

depending on the emissions of the vehicle; below 110 g/km no adjustment is required above 110 g/km disallow 15% any private usage must also be disallowed

Question 60

What about all other types of expenses?

Answer 60

Subscriptions - for professional/trade bodies are allowable Donations - to local charities are allowable, all others are disallowed Entertainment - for staff is allowable, clients is not Gifts - must cost less than £50 per recipient and not be food, alcohol, tobacco or cash vouchers to be allowable . Legal fees - allowable if incurred for the purpose of trade or relating to renewal of a short lease. Impaired debts - only write offs of trade debts are allowed fines - generally disallowed unless employee parking fines or damages being paid (no breech of law) Provision of future costs - allowable if calculated under IK GAAP or IFRS Removal cost - allowable if not for expansion purposes.

Question 61

What other adjustments may be made to income from self employment?

Answer 61

Taxable trading income - usually when trader taxed goods from the business for personal use, treat as though a sale at full market value. Non trading income - this may be income that is taxed else there or that is exempt from tax. expenditure not charged but allowable - capital allowance, business expenses paid personally, allowable trading element of lease premium.

Question 62

How is the payment of short lease premiums dealt with?

Answer 62

The amount assessed on the land lord as income can be treated as property expense for the lessee ( providing it is for trading premises) the allowable expense is spread over the length of the lease as an annual deduction. adjustments required are; add back amortisation charged on lease to accounts deduct allowable portion of lease premium

Question 63

What relief is available for pre trading expenses ?

Answer 63

expenses for up to seven years prior to the start of trading can be claimed on the first day of trading.

Question 64

What is meant by simplication for small business?

Answer 64

small business can elect to account on a cash basis if cash receipts are less than £150,000, and must move to accrual basis once receipts reach £300,000. Profit = receipts less expenses All capital expenditure is included capital allowances are available for cars

Question 65

What are flat rate expense deductions?

Answer 65

Any unincorporated business may make deductions for certain expenses on a fixed rate; motor vehicles - use the approved mileage allowance premises partly used as home - fixed rate monthly allowance for services, rent, food and utilities. any other expenses must be adjusted as usual.

Question 66

What capital expenditure qualifies as plant and machinery?

Answer 66

Machines, Motor vehicles, computers, fixtures & fittings, moveable partitioning, furniture & equipment.

Question 67

What assets will the main asset pool not contain?

Answer 67

vehicles with g/km over 110 assets that are private use assets that need to go to special rate pool assets for which a short life election has been made

Question 68

How is the capital allowance pro forma laid out?

Answer 68

``` Pools from left to right; Main Pool, special rate pool, short life assets, private use assets. TWDV b/f Additions with no AIA additions with AIA disposals WDA at each % additions with FYA FYA TWDV c/f Total allowances ```

Question 69

How are the different allowances affected by short or long periods?

Answer 69

AIA- time apportioned, not available in the period trade ceases FYA - not time apportioned, only on new low emission cars & zero emission commercial vehicles, not available in the period trade ceases. WDA - time apportioned, small pool WDA when pool value is < £1000 write all off.

Question 70

How are disposals dealt with?

Answer 70

Deduct the lower of sale proceeds and original cost from pool if the pool value becomes negative use a balancing charge to bring back to zero.

Question 71

what is the special rate pool?

Answer 71

allowance rate is 6% | used for long life asset, high emission cars and integral features of a building

Question 72

What are integral features of a building?

Answer 72

``` Electrical systems including lighting cold water systems space or water heating systems & powered air vent/cooling/purification lifts escalators and moving walkways external solar shading all thermal insulation ```

Question 73

What are long life assets?

Answer 73

plant and machinery with an expected working life >25 years and a total cost in a 12 month period >£100,000 Cannot be cars or machinery used in retail shops, offices, showrooms, hotels and houses.

Question 74

What are private use assets?

Answer 74

rules that apply when the business owner has some private use of an asset; separate column of the pro forma calculated as usual but only the business portion can be claimed on disposal a balancing adjustment is calculated based on TVWD- sale proceeds , only the business portion can be claimed. If AIA is available it is also restricted to business use.

Question 75

What are short life assets?

Answer 75

Main pool assets(not cars) which are expected to be scrapped or sold within 8 years of the end of the ap purchased in * may elect to "de pool" and cold short life asset in a separate column * if not disposed within the (8 years asset myst be transferred to the main pool.

Question 76

What's structures and buildings allowance?

Answer 76

a type of capital allowance for commercial property. to qualify - constructed or renovated after 29/10/18 calculated at 3% per annum on qualifying cost Buildings - Offices, factories, warehouses, retail & wholesale premises Structures - walls, bridges and tunnels residential property does not qualify conversion, renovation and improvement costs qualify- will be recorded as a separate allowance from purchase cost. cost of land, legal fees and professional fees don't qualify qualifying cost for unused buildings = price paid less value of land. can only be claimed from period of first use and will be time apportioned. assets eligible for SBA do not qualify for AIA. disposals - No balancing adjustment, purchaser takes over remainder of life and allowances at original value SBA is time apportioned in the period of disposal.

Question 77

What are the steps for calculating tax for a sole trader?

Answer 77

1. Adjust profits for the trading period 2. Deduct capital allowances 3. Adjusted trading profits for period

Question 78

How do we determine basis period for sole traders?

Answer 78

Commencement of trade - use opening year rules ongoing trade - assessed on accounting period ending in the tax year cessation of trader - use closing year rules

Question 79

What are the opening year rules for sole traders?

Answer 79

1st tax year - tax year in which trade starts 2nd tax year - If no POA ending in the tax year use actual tax year, other wise; POA < 12 months tax 1st 12 months of accounting POA = 12, tax the 12 months POA > 12 months tax last 12 months of accounting . 3rd tax year - current year basis unless no POA ending in year then tax last 12 months of accounting period.

Question 80

What are the closing year rules for sole traders?

Answer 80

Final tax year = tax year trade ceased in. tax all profits not previously assessed deduct overlap profits

Question 81

How can choice of accounting date impact the level of over lap profits a business may have?

Answer 81

Just after end of tax year - will see increased overlap profit Just before end of tax year - will see decreased overlap profits.

Question 82

what is the basis of assessment for partnerships?

Answer 82

each partner is taxed as an individual on their share of the taxable profits

Question 83

how is tax for a partnership calculated?

Answer 83

1. adjust the profits of the partnership for the accounting period 2. deduct capital allowances 3. share profit between partners on agreed basis 4. tax each partner individually using the standard basis period

Question 84

how is allocation of partnership profits carried out?

Answer 84

note: salaries and interest - methods used to allocate profits once salaries and interest have been allocated, remaining profit is apportioned based on profit share agreement.

Question 85

what happens when there are changes to the profit sharing agreement?

Answer 85

Profits are time apportioned for the period around the date of the change allocate profits for each period separately based on profit sharing agreements note: salaries and interest must also be time apportioned

Question 86

what about if it is a limited liability partnership?

Answer 86

for tax purposes LLP's are taxed the same way as other partnerships normal loss relief is available.

Question 87

what are the tax advantages for pension scheme investment?

Answer 87

Individuals - tax relief for contributions employers - deduction from trading profits for contributions employer contributions are an exempt benefit funds held within the pension scheme - tax free growth on retirement some funds can be taken as a tax free amount.

Question 88

what is an occupational pension scheme?

Answer 88

set up by an employer for employees contributions made by both Ee contributions made before tax calc on net salary.

Question 89

what is a personal pension scheme?

Answer 89

run by a financial institution available to all individuals contributions can be made by the individual or a third party on their behalf.

Question 90

what about tax relief on pension contributions?

Answer 90

available to all individuals under 75 both types of pension are entitled to the same amount of relief Method of obtaining relief will differ. annual limits will apply to the aggregate of pension contributions.

Question 91

what amount of tax relief is available to individuals?

Answer 91

lower of: gross contributions actually made (pss are paid net) and maximum annual amount.

Question 92

what is the maximum annual amount?

Answer 92

``` higher of £3,600 and 100% of individuals relevant income: employment income trading income income from furnished holiday lets. ```

Question 93

what amount of tax relief is available to employers?

Answer 93

on the full amount of employer contributions.

Question 94

How does tax relief work for personal pension schemes?

Answer 94

Relief at source as the contributions are deemed to have been made net of tax HMRC pays tax portion to pension provider Higher and additional rate tax payers will receive additional relief by extending basic and higher rate bands by the gross pension contributions.

Question 95

How does tax relief work for personal pension schemes?

Answer 95

contributions paid gross (from wages) | relief applied automatically as deduction is made before PAYE tax.

Question 96

what is annual allowance?

Answer 96

overriding limit for total gross pension contributions from all sources in a tax year

Question 97

how much is the annual pension allowance?

Answer 97

£40,000 per tax year unused AA from the prior three years can be carried forward if the individual is member of a registered pension scheme. carried forward amounts are used on a FIFO basis after current year.

Question 98

What if total contributions exceed the annual allowance?

Answer 98

then a charge will arise on contributions exceeding the AA 1. initially relief is given on all contributions 2. excess contributions are then taxed as if extra income is received 3. Tax is calculated after dividends at the non saving's rate 4. charge is added to the income tax liability. note this charge is not added to taxable income computation and sold not affect calculation of ANI.

Question 99

How is the annual allowance restricted for high income individuals ?

Answer 99

gradually reduced as income rises over threshold applies if; threshold income > £200,000 and adjusted income >£240,000 ( net income plus all Ee and Er pension contributions) AA is reduced by (adjusted income-240,000) x 50% maximum reduction is to £4000.

Question 100

What about accessing a pension fund?

Answer 100

can be done once pension age has been reached, this will be per the scheme rules but cannot be below 55. Individual may with draw: up to 25% of pension fund tax free withdraw the balance at any time - will be treated as taxable income.

Question 101

what is the pension life time allowance?

Answer 101

£1,073,100 (2020/21) if the value of the pension fund exceeds this and additional income tax charge arises on the excess when the funds are withdrawn.

Question 102

What are the different types of national insurance contributions?

Answer 102

``` class 1 - paid by employees (age 16 to retirement) and employers (age 16 onwards) Class 1A - paid by employers on value of taxable benefits paid to employees class 2 - self employed, flat rate payable per week once profit threshold has been exceeded class 4 - charged on trading profits over £9500. ```

Question 103

What are class 1 NIC's calculated on and what are the rates?

Answer 103

calculated on cash earnings ( no deductions) excluding exempt benefits, non cash benefits and reimbursed business expenses. Ee's rates 0% earnings between £1 and £9500 12% on earnings between £9501 and £50,000 2% on earnings over £50,000 Er's rates 0% on earnings up to £8788 13.8% on earnings over £8788.. should be strictly calculated by reference to the employees normal payment period. for directors NIC's are calculated by reference to the annual limits.

Question 104

How are class 1A NIC;s calculated and at what rate?

Answer 104

Value of taxable benefit is usually either: the cost to the employer of providing the benefit or the calculated benefit e.g. car benefit. charged at 13.8% on that value Paid annually by 19th July(22nd) following end of tax year.

Question 105

How are class 2 contributions calculated and paid?

Answer 105

Payable from age 16 to state retirement age flat rate per week once profits exceed threshold (£6475) due by 31st jan following end of tax year.

Question 106

How are class 4 contributions calculated and paid?

Answer 106

Payable from the start of the tax year following 16th birthday to start of tax year after reaching state retirement age. charged on trading profits: 9% for profits between £9501 and £50,000 2% for profits exceeding £50,000. Due with self assessment under income tax.