Chapter 6 - Class 2 and 4 NIC

Question 1

Class 2 and 4

Answer 1

Class 2 and 4 are both due from the self employed between 16 and pensionable age. Class 2 stops the day you get to pension age, Class 4 stops the tax year after the one you in which you got there

Question 2

Class 2

Answer 2

Flat rate contributions of £2.95 a week, paid on the number of weeks of self-employment in the tax year. Due as part of the balancing payment for the tax year ie the following 31 Jan.
If profits don’t exceed the small profit threshold of £6,205, there is no Class 2 NIC liability, however it can be paid voluntarily

Question 3

Class 4

Answer 3

Payable at 9% on profits between £8,424 and £46,350 and uncapped at 2% afterwards. Paid along with income tax at the POA and balancing payment dates

Question 4

Class 4 and Losses

Answer 4

Losses are always carried forward and reduce future profits for NIC purposes even if they have actually been used against other income for income tax purposes.

Question 5

Annual Maxima

Answer 5

Overall limit on total NIC paid is calculated via two annual maxima tests:
Test 1 - applies if someone has more than one employment, or is both employed and self-employed. It determines the amount of Class 2 payable and if a refund of Class 1 Primary is due.

Test 2 -only applies if someone is both employed and self-employed. Test 2 determines the correct amount of Class 4 payable.

Question 6

Deferment of NIC

Answer 6

Deferment of Class 1 Primary applies where the taxpayer has more than one employment. NICO will determine for which of the employments deferment will be granted. The employee will continue to pay Class 1 Primary at 2% on earnings in excess of the primary threshold.
Deferment does not apply to Class 2 or 4 contributions