National Insurance

Question 1

What are the four types of NI contributions

Answer 1

Class 1: employees and employers
Class 2: self-employed (flat rate)
Class 3: voluntary
Class 4: self-employed (percentage)

Question 2

What is the lower threshold for employees class 1 contributions?

Answer 2

£12,570

Question 3

What is the lower profits limit for class 4 contributions?

Answer 3

£11,908

Question 4

7 factors to determine employment status

Answer 4

1. Contract type
2. Terms of contract
3. Control
4. Substitution
5. Integration
6. Length of service
7. Risk

Question 5

Name the 8 NI contributions thresholds, with weekly amounts

Answer 5

1. Primary Contributions Threshold (£190 and £242)
2. Secondary Contributions Threshold
   (£175)
3. Lower Earnings Limit
   (£123)
4. Upper Earnings Limit
   (£967)
5. Upper Secondary Threshold
   (£967)
6. Apprentice Upper Secondary Threshold (£967)
7. Veterans Upper Secondary Threshold (£967)
8. Freeport Upper Secondary Threshold (£481)

Question 6

What are the rates for the main primary percentage and additional primary percentage?

Answer 6

MPP: 13.25%
APP: 3.25%

Question 7

What rate of NI do employers pay on their employees’ earnings?

Answer 7

15.05%

Question 8

What do the letters M, H, V, or F stand for with regards NI contributions status?

Answer 8

M = under 21
H = apprentice under 25
V = Armed forces veteran
F = Freeport employee

Question 9

How much is the employer allowance for secondary contributions?

Answer 9

£5,000

Question 10

Earnings other than wages that NI is paid on. (6)

Answer 10

1. Bonuses and overtime
2. Incentive payments to accept changes to Ts & C’s
3. Maternity, sick, holiday pay etc.
4. Lump-sums on joining/leaving unless not directly linked to duties
5. Payments to meet personal debts
6. Payments in kind and liquid assets

Question 11

When are class 1A contributions due

Answer 11

22nd July after end of tax year in which they relate

Question 12

What form are 1A NICs reported and when do they need to be submitted?

Answer 12

P11D

6 July

Question 13

What are the penalties for late submission of class 1A contributions

Answer 13

5% each after 30 days, 6 months, and 12 months

Question 14

How long can UK citizens pay NICs in the UK while temporarily working in EU

Answer 14

2 years (3 in Norway)

Question 15

What is the maximum NICs per year at the main rate for an employee?

Answer 15

5082.96

Question 16

What benefit does class 4 contributions provide entitlement to?

Answer 16

None

Question 17

What’s the small profit’s threshold above which class 2 contributions are paid?

Answer 17

£6,725

Question 18

What is the weekly flat rate for class 2 contributions?

Answer 18

£3.15

Question 19

What rate are main rate class 4 NICs paid at?

Answer 19

10.25%

Question 20

How long after the relevant year can voluntary NICs be paid?

Answer 20

6 years

Question 21

Given the option of paying voluntary class 2 and class 3 contributions, which should be preferred?

Answer 21

Class 2 as they are cheaper (£3.15 v £15.85)

Question 22

What is the NI advantage and disadvantages of paying a dividend rather than salaries to company owners?

Answer 22

A: no NICs to pay on dividends
D: 1. reduced earnings will reduce maximum pension contributions
2. Lower Earnings can restrict state benefits

Question 23

3 ways to reduce NI contributions

Answer 23

1. Pay company owners a dividend
2. Employ family members with salary below contributions threshold
3. Register as self-employed rather than employed (though may be of limited effect)