Module 1 - National Insurance Flashcards
Who pays class one NIC? And what percentage of total NI Payments does it make up?
Employers & employees - and makes up 96%
Who pays class 2 NIC’s?
The self employed along with class 4
Who pays class 3 NIC’s?
Anyone - they’re voluntary contributions. Along with 3a which are now closed.
Who pays class 4 NIC’s?
The self employed, along with class 2
At what age does NI first fall due?
16
What is the max age for personal/employee contributions to NI?
State Pension Age
Does the employer still have to pay NI contributions for an employee who has reached state pension age?
Yes
Is Employee NI deducted before the calculation of income tax?
No
Is employer NI calculated before tax on the profits is calculated?
Yes
What is the Lower Earnings Limit?
Lower Earnings Limit - the minimum level ofearnings needed for an employee to getcontributory state benefits such as state pensionwithout actually paying any NIC’s
What is the Primary Contribution Threshold?
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%
What is the Upper Earnings Limit?
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
What is the Secondary Threshold?
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%
What is the Upper Secondary Threshold and Apprentice Upper Secondary Threshold?
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.
Are NI contributions based on the tax year?
No, pay periods i.e. weekly, monthly.
In regards to NIC’s, how are company directors assessed and what does it mean?
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.
In regards to class 1 NIC - what is the annual allowance employers can use to offset against their Class 1 NIC liability?
£5000 - unless the company only has one employee, who is a director or the previous years NICs were £100k+ in the previous tax year.
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.
► 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
In simple terms, when would someone be regarded as employed?
► 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
When should an employee notify HMRC of becoming self-employed?
Within three months of the end of the month in which self-employment started.
Is class 2 a flat rate or percentage?
Flat Rate
Does Class 2 give an entitlement to contributory benefits?
Yes
Does class 4 give an entitlement to contributory benefits?
No
Where the accounting year is different to the tax year what happens in regards to calculating whether class 2 NIC’s are due?
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.
When would someone who is self employed apply for a certificate of exception from NI?
When profits are expected to be less than the £6,725 which would mean class 2 NICs are due.
How much is the fine if you fail to notify HMRC of a liability to class 2 NICs?
£100
Are personal allowances and pension contributions deducted when calculating class 4 NICs?
No
Are trading losses brought forward and certain capital allowances deducted before seeing what class 4 NICs are due?
Yes
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?
TRUE
Are excess NICs refundable?
No
