National Insurance

Question 1

Class 1 contributions

Answer 1

• payable in relation to employees ages 16+
• employees who work over state pension age pay no further primary contributions, employers still pay secondary
• calculated on gross pay before deducting pensions, donations or any other expense borne by the employee

Question 2

Class 1- contribution periods

Answer 2

• period for which the employee is being paid
• NICs calculated on non-cumulative basis. Only the earnings in the current contribution period is considered
• BUT NICs for company director are calculated on an annual basis

Question 3

Primary class 1 contributions

Answer 3

• employees pay primary contributions calculated at 12% on earnings which lie between the primary threshold and upper earnings limit.
• primary contributions are payable at 2% on any further earnings above the upper earnings limit

Question 4

how to work out monthly threshold from tax tables?

Answer 4

(Weekly x 52) / 12

Question 5

Secondary class 1 contributions

Answer 5

• Payable by employer at 13.8% of all employees earnings which lie beyond the secondary threshold.
• not required to pay contributions on earning up to the secondary threshold for employees under 21 or apprentices under 25
• Employers may deduct an ‘employment allowance’ of up to £5,000 our annum for secondary class 1 NICs/

Question 6

Class 1A contributions

Answer 6

• BIK exempt from primary and secondary class 1 NICs, no employee pays this.
• Employers must pay Class 1A contributions on taxable BIK

Question 7

Class 2 contributions

Answer 7

• Self employed required to pay weekly flat rate per week of self-employment
• Not requires if profits are less than the small profits threshold.
• Class 2 not required if profits between small and lower profits threshold but individuals maintains a full contributions record.

Question 8

how are Class 2 contributions collected?

Answer 8

Through self assessment system along with income tax and class 4 NICs

Question 9

Class 3 contributions

Answer 9

• Voluntary contributions to maintain a full contribution record
• Pay a weekly contribution
• Typically used to gain entitlement to full state pension.

Question 10

Class 4 contributions

Answer 10

• Self-employed required to pay profit related NIC’s
• Payable for a tax year and collected along with income tax liability.

Question 11

Annual maximum contributions

Answer 11

• Class 1 in respect to each employment when employee has multiple jobs.
• Class 1, Class 2 and Class 4 applicable if you are both employed and self-employed
• there’s limits on total contributions that can be made in one year which varies depending on the individual