Chapter 2 - National Insurance contributions (NICs)

Question 1

Melanie’s taxable profits from self-employment for 2021/22 are £62,000. What is Melanie’s total National Insurance contribution liability for the year?

Select one:

a. £3,821.78.
b. £3,663.18.
c. £4,056.38.
d. £3,897.78.

Answer 1

c. £4,056.38. chapter reference 2C2

Question 2

George, age 27, earns £525 per week. For 2021/22, how much Class 1 National Insurance contributions will he and his employer pay in total?

Select one:

a. £72.45 per week.
b. £40.92 per week.
c. £48.99 per week.
d. £89.91 per week.

Answer 2

d. £89.91 per week.

chapter reference 2B3A-B

Question 3

Becky, a director of her own limited company, is keen to minimise her tax liabilities so she pays herself predominantly in dividends. In order to remain entitled to contributory State benefits, her salary must be above the:

Select one:

a. secondary contribution threshold.
b. upper earnings limit.
c. lower earnings limit.
d. primary contributions threshold.

Answer 3

c. lower earnings limit.

chapter reference 2B2A

Question 4

Amir, an employee, earns £55,000 salary plus a £20,000 bonus in 2021/22. What amount of National Insurance contributions will he pay for the year, rounded down to the nearest pound?

Select one:

a. £5,378.
b. £6,127.
c. £6,032.
d. £6,527.

Answer 4

a. £5,378.

chapter reference 2B3A

Question 5

National Insurance contributions above the upper earnings limit are payable by an:

Select one:

a. employer at 12% with an upper limit.
b. employer at 2% with no upper limit.
c. employee at 2% with no upper limit.
d. employee at 12% with an upper limit.

Answer 5

c. employee at 2% with no upper limit. chapter reference 2B3A

Question 6

Luke is the owner of a website design business and when he is busy he sub-contracts some work to Sam, a self-employed IT contractor. Luke may have to pay back-dated National Insurance contributions for Sam if:

Select one:

a. there is a contract of service between Luke and Sam.
b. Sam’s work for Luke is continuous.
c. Sam’s work is not an integral part of the business.
d. there is a contract for services between Luke and Sam.

Answer 6

d. there is a contract for services between Luke and Sam.

chapter reference 2B

Question 7

Sophie is provided with a company car valued at £10,000. What National Insurance contributions [NICs] are payable on the value of the company car?

Select one:

a. Sophie’s employer will have to pay Class 1A NICs.
b. Sophie will pay Class 1 NICs and her employer will pay Class 1A NICs.
c. Both Sophie and her employer will need to pay Class 1A NICs.
d. Sophie will have to pay Class 1 NICs.

Answer 7

a. Sophie’s employer will have to pay Class 1A NICs.

chapter reference 2B4

Question 8

Bill, aged 30, earns £1,100 per week in 2021/22 as a call centre operative. What are his employer’s weekly Class 1 National Insurance contributions for him?

Select one:

a. £126.40.
b. £128.34.
c. £151.80
d. £135.24

Answer 8

b. £128.34.

chapter reference 2B3B

Question 9

Alan is a member of an unapproved share option scheme and Gary is a member of an approved share option scheme. National Insurance contributions are:

Select one:

a. not payable on either scheme.
b. payable on Alan’s scheme but not Gary’s.
c. payable on both schemes.
d. payable on Gary’s scheme but not Alan’s.

Answer 9

b. payable on Alan’s scheme but not Gary’s.

chapter reference 2B1A

Question 10

Dave has received a wide range of payments from his employer over the last year. Which payment would NOT typically be considered to be earnings for National Insurance contributions purposes?

Select one:

a. Vouchers to say thank you for a job well done.
b. School fees for his son who is at prep school.
c. Four weeks’ holiday pay.
d. Damages following a small accident at work.

Answer 10

d. Damages following a small accident at work.

chapter reference 2B1

Question 11

Who would NOT be able to pay Class 3 National Insurance contributions [NICs] for the tax year 2021/22?

Select one:

a. Gerry, who arrives in the UK on 20 October 2021 with no previous liability to NICs.
b. Joseph, who has been resident in the UK for all of 2021/22, with a previous liability to Class 2 NICs.
c. Aiden, who arrives in the UK on 13 September 2021 with no previous liability to NICs.
d. Carla, who arrives in the UK on 2 January 2022, with a previous liability to Class 1 NICs.

Answer 11

a. Gerry, who arrives in the UK on 20 October 2021 with no previous liability to NICs.

chapter reference 2E

Question 12

Sophie is provided with a company car valued at £10,000. What National Insurance contributions [NICs] are payable on the value of the company car?

Select one:

a. Sophie will have to pay Class 1 NICs.
b. Both Sophie and her employer will need to pay Class 1A NICs.
c. Sophie’s employer will have to pay Class 1A NICs.

Correct, chapter reference 2B4

d. Sophie will pay Class 1 NICs and her employer will pay Class 1A NICs.

Answer 12

c. Sophie’s employer will have to pay Class 1A NICs.

chapter reference 2B4

Question 13

Dave has received a wide range of payments from his employer over the last year. Which payment would NOT typically be considered to be earnings for National Insurance contributions purposes?

Select one:

a. Vouchers to say thank you for a job well done.
b. School fees for his son who is at prep school.
c. Damages following a small accident at work.
d. Four weeks’ holiday pay.

Answer 13

c. Damages following a small accident at work.

chapter reference 2B1

Question 14

Becky, a director of her own limited company, is keen to minimise her tax liabilities so she pays herself predominantly in dividends. In order to remain entitled to contributory State benefits, her salary must be above the:

Select one:

a. secondary contribution threshold.
b. primary contributions threshold.
c. lower earnings limit.
d. upper earnings limit.

Answer 14

c. lower earnings limit. chapter reference 2B2A

Question 15

Ahmed is employed as a school caretaker, and also runs a small business making toys. What is the maximum he will pay in Class 1 and Class 2 National Insurance contributions combined for 2021/22?

Select one:

a. £4,851.84.
b. £5,042.84.
c. £4,892.40.
d. £4,884.24.

Answer 15

d. £4,884.24. chapter reference 2D1

Question 16

George, age 27, earns £525 per week. For 2021/22, how much Class 1 National Insurance contributions will he and his employer pay in total?

Select one:

a. £40.92 per week.
b. £72.45 per week.
c. £48.99 per week.
d. £89.91 per week.

Answer 16

d. £89.91 per week.

chapter reference 2B3A-B

Question 17

Jess is a self-employed hairdresser with net profits of £15,000 for the 2021/22 tax year. What class[es] of National Insurance contributions is she subject to and how much?

Select one:

a. £156 Class 2 and £495 Class 4.
b. £158.60 Class 2 and £488.88 Class 4.
c. £488.88 Class 4 only.
d. £156 Class 1 and £488.88 Class 4.

Answer 17

b. £158.60 Class 2 and £488.88 Class 4.

chapter reference 2C2

Question 18

Amir, an employee, earns £55,000 salary plus a £20,000 bonus in 2021/22. What amount of National Insurance contributions will he pay for the year, rounded down to the nearest pound?

Select one:

a. £6,527.
b. £5,378.
c. £6,127.
d. £6,032.

Answer 18

b. £5,378.

chapter reference 2B3A

Question 19

Melanie’s taxable profits from self-employment for 2021/22 are £62,000. What is Melanie’s total National Insurance contribution liability for the year?

Select one:

a. £3,821.78.
b. £4,056.38.
c. £3,897.78.
d. £3,663.18.

Answer 19

b. £4,056.38. chapter reference 2C2

Question 20

Luke is the owner of a website design business and when he is busy he sub-contracts some work to Sam, a self-employed IT contractor. Luke may have to pay back-dated National Insurance contributions for Sam if:

Select one:

a. there is a contract of service between Luke and Sam.
b. Sam’s work for Luke is continuous.
c. Sam’s work is not an integral part of the business.
d. there is a contract for services between Luke and Sam.

Answer 20

d. there is a contract for services between Luke and Sam. chapter reference 2B

Question 21

Tomaz is taxed by his employer on £3,000 as a benefit in kind in relation to a van which he also uses outside work. What National Insurance contributions would be payable on this?

Select one:

a. Tim will pay £414 of class 1 contributions.
b. His employer will pay £414 of class 1A contributions.
c. Tim will pay £270 of class 1 contributions.
d. His employer will pay £270 of class 1A contributions

Answer 21

b. His employer will pay £414 of class 1A contributions.

chapter reference 2B4

Question 22

Bryan is employed and has weekly earnings of £865. How much are his weekly class 1 National Insurance contributions in the tax year 2021/22?

Select one:

a. £81.72.
b. £83.40.
c. £89.40.
d. £103.80.

Answer 22

a. £81.72.

chapter reference 2B3A

Question 23

James has recently reduced the hours he works for his employer and has been informed that he will no longer receive any National Insurance credits towards his State pension. This is because he is:

Select one:

a. earning less than the lower earnings limit.
b. working part-time.
c. earning less than the primary contribution threshold.
d. claiming universal credit.

Answer 23

a. earning less than the lower earnings limit.

chapter reference 2B2A

Question 24

Josh, 22, has been taken on as an apprentice at a local engineering firm, earning £300 a week. What is the position with National Insurance contributions?

Select one:

a. Josh will have no liability to Class 1 primary NICs, but his employer will have a liability to Class 1 secondary NICs on his income.
b. Josh will be liable to Class 1 primary NICs, and his employer will be liable to Class 1 secondary NICs.
c. Josh will be liable to Class 1 primary NICs, but his employer will have no Class 1 secondary liability on his income.
d. Neither Josh or his employer will be liable to Class 1 NICs, whether primary or secondary.

Answer 24

chapter reference 2B2

Question 25

Trevor has been informed that he will NOT have to pay any National Insurance on a recent payment from his employer. This is because it was:

Select one:

a. holiday pay.
b. made in the form of vouchers redeemable for cash.
c. paternity pay.
d. a redundancy payment.

Answer 25

d. a redundancy payment.

chapter reference 2B1

Question 26

If John earns £586 per week, how much could his income increase by before he reaches the upper earnings limit?

Select one:

a. £306.
b. £184.
c. £381.
d. £120.

Answer 26

c. £381.

chapter reference 2B2A