Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

R3 > Ch 2 - NICs > Flashcards

Ch 2 - NICs Flashcards

1
Q

NICS are only payable on what kind of income?

A

Earned income

ignore dividend/rental income/savings income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What classes of NICs do self-employed pay?

A

Class 2 (flat) & class 4 (%)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Class 1 NICs are only applicable to who?

A

Employed individuals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Are contributions made into an occupational pension scheme liable to NIC?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

If shares are readily convertible into cash and have been acquired through an unapproved share option scheme, will they be liable to NIC?

A

Yes, payable on shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the Lower Earnings Limit (LEL)?

A

The minimum level of earnings for an employee to be entitled to contributory State benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the Primary Contribution Threshold (employee)?

A

Weekly £184
Monthly £797
Yearly £9,569

Employees pay NICs above this amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the Secondary Contribution Threshold (employer)?

A

Weekly £170
Monthly £737
Yearly £8,840

Employers pay NICs above this amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the Upper Secondary Threshold (UST)/Apprentice Upper Secondary Threshold (AUST)?

A

Weekly £967
Monthly £4,189
Yearly £50,270

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the rate of Class 1 NICs for an employee?

A
  • Have nothing to pay if they earn below the primary threshold
  • 12% on earnings above the primary threshold up to the UEL
  • 2% on earnings above the UEL (additional primary percentage)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the rate of Class 1 NICS for employers?

A
  • Have nothing to pay up to the secondary threshold

* 13.8% on anything above the secondary threshold, with no upper limit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the rate of Class 1 NICS for apprentices under 25 or employees under 21?

A
  • Nothing to pay up to the UST/AUST (£967 p/week)

- 13.8% on anything above

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the employment allowance for employers?

A

£4000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

When is the employment allowance withdrawn?

A
  • Director is sole employee

- If an employer had contributions > £100,000 in prev year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the Married Women Reduced Rate for NICs?

A
  • For earnings of £184-£967 (UEL) pw, the rate is reduced to 5.85%
  • Anything above £967 pw is 2%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What was the cut off date for Married Women Reduced Rate?

A

6th April 1977

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When is the Married Women’s Reduced Rate revoked?

A
  • Divorce
  • Remarriage
  • Earnings less than LEL for 2 years in a row with no self employed earnings
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

When are Class 1A contributions paid?

A

paid by employers in relation to most benefits in kind

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the rate of Class 1A NICs?

A

Flat rate of 13.8%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Trivial benefits costing what, are also free of NICs?

A

£50 or less

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

How are Class 1 NICs collected for employees?

A

Collected through PAYE

22
Q

Who is responsible for the calculation of Class 1 NICs?

A

Employer

23
Q

When are Class 1A benefits collected/due?

A

Due on 22nd of July of the end of the tax year to which they relate (19th of July if not electronic)

24
Q

What form must Class 1A benefits be declared on?

A

P11D (submitted by 6th July)

25
Q

What are the penalties for the late payment of Class 1 NICs?

A
  • No penalty for the first late payment in a tax year, unless it is more than 6 months late
  • Penalties start at 1% of the late amount and increases depending on the amount of late payments in the same tax year
  • 5% will be charged for payments more than 6 months late and a further 5% if the payment is still not received after 12 months
  • any late payment will be charged interest daily
26
Q

What are the penalties for the late submission of Class 1 NICs?

A
  • There is no penalty for the first late submission during the tax year, but for any further late submissions, a late-filing charge of £100-£400 is applied depending on the number of employees
  • If a submission is 3 months late, an additional 5% can be charged
27
Q

EEA nationals should only make social security contributions where?

A

In one state

normally same country as employee contributions

28
Q

If a UK worker is temporarily in EEA/Norway, can ask HMRC to issue certificate to allow UK contributions for how many years?

A

2 years (3 in Norway)

29
Q

If a UK national goes to work abroad for a UK employer, HMRC will continue to collect NICs for how long?

A

52 weeks

30
Q

How are NICs collected for a director?

A

The total earnings within a tax year are used

31
Q

If a director takes dividends rather than salary, is this liable to NICs?

A

No

32
Q

What is the minimum that a director must pay themselves?

A

Minimum national living wage

33
Q

Which workers will be treated as employees for NIC purposes (not necessarily income tax purposes)?

A
  • Domestic workers and office cleaners
  • Agency workers
  • Lecturers and instructors
  • Ministers of religion
    Workers in the film and television industry (except freelance and casual workers who are self-employed)
  • Labour only subcontractors
34
Q

What is the NIC treatment of a sub-postmaster?

A
  • Class 1 deducted from salary

- Class 2 + 4 liable on trading profit

35
Q

What is the NIC treatment of Share Fisherman?

A
  • If a fisherman is self-employed and shares the profits of a fishing boat registered in Great Britain, they are liable to class 2 and 4 NICs, even though they work outside the UK
  • A special rate of £3.70 per week for class 2 NICs applies, as they will qualify for new style Jobseeker’s Allowance
36
Q

What is a Class 3 Contribution?

A

Voluntary to fill in gaps in contribution record (paid at a flat rate of £15.40 per week)

37
Q

How long after a tax year can Class 3 NICs be paid?

A

6 years

38
Q

How can companies can reduce their NIC liability?

A

Pay out dividends as opposed to salary

not a deductible expense for corporation tax purposes, unlike salary

39
Q

What salary means the employee has no NIC liability but still receives entitlement to state benefits?

A

Between £6,240 (LEL) and £9,569 (Primary Contribution Threshold)

40
Q

What is the rate of Class 2 Contributions?

A

• Charged at a flat weekly rate of £3.05 when the individual earns over the small profits threshold of £6,515

41
Q

How are Class 2 contributions paid?

A

Paid via the self-assessment system and due on the following 31st January after the end of the tax year

42
Q

What is the threshold for Class 4 contributions?

A

Lower annual limit (£9,569)

43
Q

What are the rates and thresholds for Class 4 contributions?

A

Between £9,569 - £50,270 = 9%

Above £50,270 - 2%

44
Q

How are Class 4 contributions paid?

A

Paid via the self-assessment system, however it is paid the same time as income tax with 2 payments on account (31st January during the tax year and 31st of July after the tax year) and a balancing payment the following 31st January

45
Q

How can an individuals who become self-employed outside the UK maintain their contribution record for State benefits purposes?

A

Opt to pay Class 2s

46
Q

What are the residency conditions for Class 3s?

A
  • The individual must have been a resident in the UK throughout that tax year; or
  • Arrived in the UK during the tax year and has previously been liable for class 1 or class 2 NICs; or
  • Arrived in the UK during the tax year and has been resident for 26 weeks
47
Q

How is a director taxed?

A

As an employee (12% then 2%)

48
Q

How does deferment work if an individual works for two unconnected companies?

A

1) One employer is instructed to deduct employees NICs at only 2% on annual earnings above £9568
2. Calculate Annual Maximum limit (£4884.24)
+ NICs payable at 2% in excess of £40,702
- NICs actually paid
= Payable after end of tax year

Page 88 CII RevisionBook

49
Q

If a person is employed and self employed, what are their Class 4 Contributions limited to?

A

(Max Class 4 NICs at UEL*) - (Class 1 NICs actually paid)

*(£50270-£9568) x 9% = £3663.18

50
Q

Childcare benefits are free of NICs up to what amount

A

£55 p/week

51
Q

Are NICs payable on unapproved share schemes?

A

Yes

52
Q

Are NICs payable on approved share schemes?

A

No

R3 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions