Chapter 22 - Class 1 NIC Flashcards
Who pays primary and secondary Class 1 NIC contributions?
Primary - employees
Secondary - employers
What are Class 1 NICs paid on?
Earnings from the employment
When are primary & secondary NICs accounted for under PAYE and paid to HMRC?
22nd of each month
Define what is meant by ‘earnings’ for NIC purposes
Any cash payment made by an employer to an employee - including salaries, bonuses, PENP pay
True or false
An employer settling an employee’s liability does not constitute as earnings for Class 1 NIC
False
Is a payment made by an employer that can be surrendered for cash considered earnings for NIC purposes? If yes, provide an example
Yes
Premium bonds can legally be exchanged for cash
True or false
Payments in the form of ‘readily convertible assets’ are earnings for NIC purposes
True
This is an asset that is traded on a recognised stock or commodities exchange
True or false
Vouchers & mileage payments over 45p are earnings for NIC purposes
True
Mileage payments under 45p are not earnings
For employees who receive their remuneration weekly, what is the primary & upper threshold?
Primary - £242 per week
Upper - £967 per week
For employees with a monthly earnings period, what is the primary & upper threshold?
Primary - £1,048 per month
Upper - 4,189 per month
Where employees are in excess of the upper limit, at what rate do they pay Class 1 NIC?
The additional rate of 2% on earnings in excess
At what rate is earnings between the primary threshold and upper threshold paid at?
8%
How do we calculate the NICs for the year?
12 separate NIC calculations & add them together
What is the secondary threshold for Class 1 secondary NICs?
£175 per week
£758 per month
£9,100 per annum
What are the current rates for Class 1 Secondary NICs?
0% on earnings up to the threshold
13.8% on excess
In the case of an employee earnings £23,000 in 2024/25, how do you calculate the secondary liability to be paid by the employer?
(23,000 - 9,100) x 13.8% = £1,918
True or false
Class 1 secondary contributions paid by the employer in respect of an employee is deductible by the employer in arriving at taxable profits
True
Where earnings are paid to an employee under the age of 21, what is the rate of employer’s secondary contributions on earnings between the secondary & upper threshold?
0%
