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Taxation FA22 > National Insurance > Flashcards

National Insurance Flashcards

1
Q

The main classes of contribution:

A

Class 1 employee
Class 1 employer’s
Class 1 A
Class 2
Class 4

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2
Q

The class 1 employee basis of assessment

A
  • a percentage based contribution levied on employee earnings in excess of the employee limit for the tax year 2022/23 of £12,570
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3
Q

The class 1 employer’s basis of assessment

A
  • a percentage based contribution levied on employee earnings in excess of the employer’s limit for the tax year 2022/23 of £9,100
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4
Q

The class 1A basis of assessment

A
  • a percentage based contribution levied on taxable employment benefits provided to employees
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5
Q

The class 2 basis of assessment

A
  • a flat rate weekly contribution
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6
Q

The class 4 basis of assessment

A
  • a percentage based contribution levied on tax adjusted trading profits in excess of the lower profits limit £12,570 for the tax year 2022/23
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7
Q

What are the NICs payable in respect of employees?

A
  • class 1 employee NICs
  • class 1 employer’s NICs
  • class 1A NICs
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8
Q

Earnings for the purpose of class 1 NICs consists of:

A
  • any remuneration derived from the employment
  • paid in cash or assets which are readily convertible into cash
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9
Q

What is the calculation of class 1 NICs is based on?

A
  • gross earnings with no allowable deductions
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10
Q

What will be included in gross earnings regarding class 1 NICs?

A
  • wages, salary, overtime pay, commission or bonuses
  • sick pay, including statutory sick pay
  • tips and gratuities paid or allocated by the employer
  • reimbursement of the cost of travel between home and work
  • vouchers
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11
Q

What will be not included in gross earnings regarding class 1NICs?

A
  • exempt employment benefits
  • most taxable non-cash benefits
  • tips directly received from customers
  • mileage allowance received from the employer provided it does not exceed the HM Revenue and Customs approved mileage allowance rate
  • expenses paid for or reimbursed by employer for which an income tax deduction would be available
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12
Q

Class 1 NICs are payable where the individual:

A
  • is employed in the UK
  • is aged 16 or over, and
  • has earnings in excess of the earnings limit
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13
Q

The employee contributions payable are calculated as:

A
  • 13.25% on gross earnings between £12,571 and £50,270
  • 3.25% on gross earnings in excess of £50,270
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14
Q

Class 1 employer’s NICs payable by who?

A
  • aged 16 or over
  • until the employee ceases employment
  • they are deductible expense when calculating the employer’s tax adjusted trading profits
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15
Q

Employer’s contributions are calculated as:

A
  • 15.05% on all gross earnings above £9,100.
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16
Q

How is calculated class 1 NICs for a company director?

A
  • as if the director had an annual earnings period, regardless of how the employee is paid
17
Q

How are carried out payments of class 1 NICs by the employer?

A
  • the employer is responsible for calculating the amount of class 1 employee and employer’s contributions at each pay date
  • employee contributions are deducted from the employee’s wages or salary by the employer and paid to HMRC on employee’s behalf
  • the total employee and employer’s contributions are payable by the employer to HMRC, along with income tax deducted from the employees under PAYE
  • the payment is due on the 19th of each month but if paid electronically are normally due on 22nd of each month
  • the specific payment rules for very small employers and those not paying electronically
18
Q

NIC employment allowance

A
  • claim up to £5,000 relief (class 1 NICs)
  • cannot be used against any other classes of NICs
  • is claimed through the real time information PAYE system
  • is not available to companies where a director is the sole employee paid over the earnings limit of £9,100
  • is only available to employers with total class 1 employer’s contributions <£100,000 in the previous tax year
19
Q

Class 1A NICs are payable in respect of:

A
  • exempt benefits (those benefits which are exempt from income tax)
  • benefits already treated as earnings and subject to class 1 NICs, such as remuneration received in the form of non-cash vouchers
20
Q

Calculation of Class 1A NICs

A
  • 15.05% on the value of the taxable benefits
21
Q

When is the class 1A NICs payable?

A
  • to HMRC by 19 July following the end of the tax year
  • electronically by 22 July following the end of tax year.
22
Q

NICs payable in respect of self-employed individuals

A
  • Class 2 NICs
  • Class 4 NICs
23
Q

Class 3 NICs are payable where the individual:

A
  • is aged 16 or over
  • until attaining state pension age
  • if the tax adjusted trading profits of the business for the tax year exceed the lower profits limit of £12,570
24
Q

What is the flat rate for class 2 NICs contribution?

A
  • £3.15 per week
  • £164 total
  • are not allowable deduction for the purposes of calculating the individual’s income tax liability
  • are not a deductible expense when calculating the business’s tax adjusted trading profits
25
Q

Payment of class 2 contributions

A
  • collected by HMRC through the self-assessment system
  • payment due by 31 January following the end of tax year along with the balancing payment for income tax and class 4 NICs
  • HMRC can collect unpaid class 2 NICs from individuals if they are also employed, by adjusting their PAYE tax code
26
Q

Class 4 contributions are payable by self-employed individuals who:

A
  • at the start of the tax year, are aged 16 or over
  • continue pay till the end of the tax year in which they reach state pension age
  • are not allowable deduction for the purposes of calculating the individual’s income tax liability
  • are not a deductible expense when calculating the business’s tax adjusted trading profits
27
Q

Profits for the purposes of class 4 NICs consists of:

A
  • the tax adjusted trading profits of the individual that are subject to income tax after deducting trading losses
  • profits are before deducting the individual’s personal allowance that is available for income tax purposes
28
Q

Calculation of class 4 NICs

A
  • 10.25% on profits between £12,571 and £50,270
  • 3.25% on profits in excess of £50,270
29
Q

When is due date for class 4 NICs?

A
  • payable with income tax due under self assessment
30
Q

What self-employed are due to pay regarding NICs?

A
  • class 2 and class 4 NICs regarding of their trading profits
  • if employ staff then class 1 employee, class 1 employer and class 1A NICs in respect of earnings and benefits provided to employees

Taxation FA22 (25 decks)

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