Chapter 2 - National Insurance

Question 1

NIC Classes - Employed

Classes
Threshold

Answer 1

Class 1 - Employee and employer

Upper Secondary Threshold - Under 21st / Apprentice Upper Secondary Threshold £967 pw - upper limit for 0% employers rate
for under 21’s / apprentices under 25 / armed forces veterans in first year of civilian employment
Secondary Contribution Threshold - £170 - employers pay class 1 above this level
Upper Earnings Limit - £967 maximum level of earnings on which employee pays NIC rate
Primary Contribution Threshold - £184 - employees pay class 1 above this level
Lower Earnings Limit - £120 - Minimum earnings for employee to be entitled to state benefits

Calculated from regular wages and salary as many other items such as:

• Bonuses, overtime and holiday pay
• Incentive Payments to employees to accept changes to terms of contract
• Maternity, paternity, shared parental, adoption and sick pay
• Lump sums received on joining or leaving an employment
• Payments in kind and assets that can be easily be converted into cash

Class 1A Payments are due on 22 July after the end of tax year which they relate to, but on 19th July if the payment is not made electronically

Question 2

NIC Classes - Employed

Rates
Allowance

Answer 2

Employee

• First £184 per week = 0%
• £184.01 - £967 per week = 12%
• Above £967 per week = 2% (additional primary percentage)

Employer

• First £170 per week = 0%
• Over £170 per week = 13.8% ( no ceiling)

Employment Allowance

• £4,000 per year
• Deducted from total secondary threshold contributions

Question 3

Married woman - Reduced Rate

Answer 3

• Before 06/04/1977 could elect to pay reduced rates
• Employee £184 - £967 per week = 5.85%
• Above £967 per week 2%
• Revoked on divorce, remarriage, earning less than the LEL for two tax years in a row and no self employment earning

Question 4

NIC Classes - Self Employed

Classes
Threshold
Rates
Allowance

Answer 4

Class 2

• Entitlement to state benefits
• Flat rate
• If earning below £6,515, can choose not to pay

Class 4

• No entitlement to state benefits
• Earning related
• Charged for tax year on profits assessed for income tax for that year
• Loss from previous years can be brought forward to reduce Class

Rates

1. Class 2
   - Weekly flat rate £3.05
2. Class 4
   - Main rate - 9%
   - Lower annual limit £9,568
   - Upper annual limit £50,270
   - Additional rate on earnings above upper limit - 2%

Collecting Contributions
Class 2 due on 31 Jan following the end of the tax year they relate to (i.e. 31 Jan 23 for 2021/22)
Class 4 - 2 payments on account and balancing payment

Question 5

Changes in NI

Answer 5

Start of tax year (6th of April)

Question 6

Coming to the UK / Leaving the UK

Answer 6

HMRC will wait until the individual has been a resident in the UK for 52 weeks

HMRC will usually continue to collect NIC for 52 weeks