Ch 10: National Insurance

Question 1

What NIC do employees pay?

Answer 1

Class 1

Question 2

What NIC do employers pay?

Answer 2

Class 1 secondary
Class 1A (on benefits)

Question 3

When are Class 1 NICs due?

Answer 3

Payable with PAYE, after the end of the tax month in which the liability arises.
Most businesses pay electronically which is the 22nd of every month

Question 4

When are Class 1A NICs due?

Answer 4

Payable by 22 July following the end of the tax year

Question 5

What NIC do you pay on PAYE settlement agreements?

Answer 5

Class 1B - where the employer pays the income tax and NICs due on small ad-hoc taxable employee benefits

Question 6

How do you calculate the Class 1B NIC?

Answer 6

13.8% on the value of the benefit (grossed up to factor in the income tax due)

Question 7

What NIC do self employed and partners pay?

Answer 7

Class 2 & 4

Question 8

When are Class 4 NICs due?

Answer 8

They’re paid as part of the self assessment system (payments on account on 31 Jan and 31 July)

Question 9

When are Class 2 NICs due?

Answer 9

By 31 Jan following the tax year

Question 10

What is exempt from NICs?

Answer 10

Dividends

Question 11

What are the 4 steps to calculate the after tax income for an employee?

Answer 11

1. List all cash received - salary, bonus
2. Deduct all cash payments - pension contributions, expenses incurred by the employee
3. Calculate and deduct income tax payable - on earnings and benefits
4. Calculate and deduct Class 1 NICs

Question 12

What are the steps to calculate the after tax cost for an employer?

Answer 12

1. Record ALL expenditure incurred - staff costs, Class 1 & 1A NICs
2. Calculate and deduct the tax saving on the allowable expenditure
3. Deduct any disallowed items of expenditure - client entertaining, 15% of leasing costs on cars with emissions of > 110g/km