Module 1 - National Insurance

Question 1

Who pays class one NIC? And what percentage of total NI Payments does it make up?

Answer 1

Employers & employees - and makes up 96%

Question 2

Who pays class 2 NIC’s?

Answer 2

The self employed along with class 4

Question 3

Who pays class 3 NIC’s?

Answer 3

Anyone - they’re voluntary contributions. Along with 3a which are now closed.

Question 4

Who pays class 4 NIC’s?

Answer 4

The self employed, along with class 2

Question 5

At what age does NI first fall due?

Answer 5

16

Question 6

What is the max age for personal/employee contributions to NI?

Answer 6

State Pension Age

Question 7

Does the employer still have to pay NI contributions for an employee who has reached state pension age?

Answer 7

Yes

Question 8

Is Employee NI deducted before the calculation of income tax?

Answer 8

No

Question 9

Is employer NI calculated before tax on the profits is calculated?

Answer 9

Yes

Question 10

What is the Lower Earnings Limit?

Answer 10

Lower Earnings Limit - the minimum level ofearnings needed for an employee to getcontributory state benefits such as state pensionwithout actually paying any NIC’s

Question 11

What is the Primary Contribution Threshold?

Answer 11

Relates to the EMPLOYEE Primary Contribution Threshold - Employee NI ischarged on earnings above this level. £242 per weekfrom 6th July (averaged annual threshold for calcs is£11,908). The rate is 12.73%

Question 12

What is the Upper Earnings Limit?

Answer 12

This is the maximum level of earnings that employees have to pay NI at the main rate of 12.73%. 2022/23 = £50,270 per annum or £967 per week. The rate falls to 2.73% for earnings above this

Question 13

What is the Secondary Threshold?

Answer 13

Relates to the EMPLOYER

Employer NI is charged on employee earnings above this level. It is only for employees over the age of 21 and apprentices above the age of 25.

2022/23 = £9,100 per annum or £175 per week and the rate is 14.53%

Question 14

What is the Upper Secondary Threshold and Apprentice Upper Secondary Threshold?

Answer 14

Relates to the EMPLOYER

Employer NI is charged on employee earnings above this level.

This is for employees under the age of 21 and apprentices under 25. 2022/23 = £50,270 per annum or £967 per week.

Question 15

Are NI contributions based on the tax year?

Answer 15

No, pay periods i.e. weekly, monthly.

Question 16

In regards to NIC’s, how are company directors assessed and what does it mean?

Answer 16

Annual earnings period. This means that every time they receive a payment, the total earnings received from the start of the tax yearmust be taken into consideration when determining the level of NI due.

Question 17

In regards to class 1 NIC - what is the annual allowance employers can use to offset against their Class 1 NIC liability?

Answer 17

£5000 - unless the company only has one employee, who is a director or the previous years NICs were £100k+ in the previous tax year.

Question 18

Name some instances where someone might build up a ‘credit’ for NI paid, even where no NI is actually paid. This is significant for entitlement to state benefits. 8 total.

Answer 18

► Periods where you are looking for work
► Periods where you are ill, disabled or on sick pay
► When you are on maternity, paternity or adoption pay
► When you are caring for a child under the age of12
► If you are on jury service
► If you have been wrongly put in prison,
► If you are caring for someone who is sick or disabled, or
► If you are married to a member of the armed forces serving overseas

Question 19

In simple terms, when would someone be regarded as employed?

Answer 19

► There is a contract of service rather than a contract to provide services
► There is a substantial amount of control exerted by the ‘employer’ over where and how the work is done and ► Where the work done is an integral part of thebusiness

Question 20

When should an employee notify HMRC of becoming self-employed?

Answer 20

Within three months of the end of the month in which self-employment started.

Question 21

Is class 2 a flat rate or percentage?

Answer 21

Flat Rate

Question 22

Does Class 2 give an entitlement to contributory benefits?

Answer 22

Yes

Question 23

Does class 4 give an entitlement to contributory benefits?

Answer 23

No

Question 24

Where the accounting year is different to the tax year what happens in regards to calculating whether class 2 NIC’s are due?

Answer 24

Where the accounting year is different to the tax year,the individual’s profits will be apportioned between the tax years to work out whether profits falling in the tax year exceed the threshold.

Question 25

When would someone who is self employed apply for a certificate of exception from NI?

Answer 25

When profits are expected to be less than the £6,725 which would mean class 2 NICs are due.

Question 26

How much is the fine if you fail to notify HMRC of a liability to class 2 NICs?

Answer 26

£100

Question 27

Are personal allowances and pension contributions deducted when calculating class 4 NICs?

Answer 27

No

Question 28

Are trading losses brought forward and certain capital allowances deducted before seeing what class 4 NICs are due?

Answer 28

Yes

Question 29

When calculating the amount payable for either class 2or class 4, earnings from more than one self-employment should be added together. True or False?

Answer 29

TRUE

Question 30

Are excess NICs refundable?

Answer 30

No