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Ro3 Personal Taxation > National Insurance > Flashcards

National Insurance Flashcards

1
Q

What is national insurance

A

A compulsory contribution to the state social security system.

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2
Q

What affects how much national insurance you pay?

A

The amount you work and whether you are employed or self employed.

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3
Q

What are class one contributions?

A

Paid by both employers and employees.

96% of total contributions

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4
Q

What are class two and four contributions?

A

Contributions paid by self employed

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5
Q

What are class 3 and class 3a contributions?

A

Voluntary contributions

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6
Q

What is included as earned income for NI?

A

Wages
Salary
Bonuses
Maternity/paternity/adoption
Golden hello/handshake
Payments to cover employee liabilities
Money in like
Shares in unapproved incentive schemes

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7
Q

Who is potentially liable to class one NI?

A

Anyone between 16 and state pension age.

Employers still have to pay after the employee reaches pension age.

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8
Q

What rate has the NI between £242 and £967 changed to in Jan 2024?

A

From 12% to 10%

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9
Q

How is NI deducted for employees and employer?

A

Employee deducted before calculating income tax

Employer after calculating income tax

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10
Q

What is Class 1A NI?

A

NI for certain in kind benefits

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11
Q

How much is class 1A currently

A

13.8% of the value of benefit

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12
Q

What is the term low earnings rate for NI?

A

The minimum level of earnings needed for an employee to get contributory state benefits without paying paying any NIC

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13
Q

What is the low earnings limit for NI?

A

£6,396 or £123 per week

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14
Q

What is the term primary contribution threshold?

A

Employee NI is charged on earnings above this level.

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15
Q

What is the rate for the primary contribution threshold?

A

£242 per week or £12,570

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16
Q

What is the term upper earning limit for NI?

A

The maximum level of earnings employees have to pay NI at the main rate of 12 or 10%. 2% above this.

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17
Q

What is the upper earning level?

A

£50,270 pa
Or £967 pw

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18
Q

What is the term secondary threshold?

A

The level where employers are charged on employee NI

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19
Q

What are the ages for employees where the secondary threshold starts?

A

21 and 25 for apprentices

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20
Q

What is the secondary threshold amount?

A

£9100 pa
£175 pw

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21
Q

What is the secondary threshold rate?

A

13.8%

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22
Q

What is the term upper secondary threshold and the apprentice upper threshold?

A

The threshold that must be passed to pay NI on employee or apprentice earnings

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23
Q

What is the current level for the upper secondary threshold?

A

£50,270 pa
£967 pw

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24
Q

What is the maximum limit for employer NICs?

A

There is no maximum limit

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25
Q

How are company directors assessed for NI?

A

On their annual earnings period.

Every payment must consider total earnings from the start of the tax year.

26
Q

How do directors reduce or eliminate NI?

A

By taking pay in dividends or having a spouse work in the business.

27
Q

What is the employer allowance?

A

£5000

28
Q

Where can the employer allowance not be used?

A

In a company where the durector is the only employee or where an employers NICs were over £100,000 the year before.

29
Q

What instances can build up credit for NI even when none is paid?

A

Looking for work
Ill, disabled or on sick pay
Maternity, paternity adoption pay.
Caring for a child under 12
Jury service
Wrongly put in prison
Caring for someone sick or disabled
Married to a member of the armed forces serving overseas

30
Q

What is considered employed for NI reasons?

A

Has a contract of service
Substantial control exerted by the employer.
Work done is an integral part of the business.

31
Q

What additional groups might be considered employees for tax reasons?

A

Domestic workers and office cleaners
Agency workers
Lectures and instructors

32
Q

What percentage of NI do class 2 and 4 make up?

A

3%

33
Q

When do you need to register for self-assessment when self-employed?

A

5 October in your businesses 2nd year.

34
Q

What are class 2 contributions?

A

Flat rate NICs for self-employed that go towards NI contributory benefits

35
Q

How much profit per annum will require class 2 NICs to be paid?

A

£6,725

Profits aportioned between the tax year if falling outside this.

36
Q

If earnings are expected to be less than the threshold for class 2 NICs, what can be done?

A

The self-employed individual can apply for exemption but will be required to provide proof unless in their first business year.

37
Q

How much are class 2 NICs?

A

£3.45 per week

38
Q

How much is the fine for failing to pay class 2 NICs

A

£100

39
Q

When were class 2s abolished?

A

6th April 2024

40
Q

What are class 4 NICs?

A

Earnings releated NICs based on profits chargeable to income tax after adjusting for certain capital allowances and trading losses brought forward.

41
Q

What is not deducted from the profits on class 4 NICs?

A

Personal allowances and pension contributions.

42
Q

What is the rates for class 4 NICs?

A

9% between £12,570 to £50,270
2% above this

43
Q

How much is the main rate of NICs for class 4 after April 2024

A

8%

44
Q

Who administers NI

A

The National Insurance Contributions Office (NICO) of the HMRC

45
Q

Are excess NICs refundable?

A

No

46
Q

How is class 1 NI usually collected?

A

Through the PAYE system.

47
Q

Where are NIs usually shown?

A

In the employees’ RTI returns and their annual P60.

48
Q

When are class 1A payments due?

A

19th July the following tax year from receiving the benefit in kind

22nd if made electronically

49
Q

Where must class 1a contributions be recorded?

A

The employees P11D form
The employers P11D(b) form

50
Q

When must the P11D forms be submitted to the HMRC?

A

By 6th July after the tax years end.

51
Q

What is the penalty for late payments of employee NI?

A

1% starting rate.

5% for payments later than 6 months with an extra 5% charge for those not paid within 12 months

52
Q

What is the penalty for class 1a late payments?

A

3 lots of 5%

30 days
6 months
12 months

53
Q

When will a penalty be lived against class 2 NIs for not notifying?

A

31st January, the following tax year after the eligible person became eligible.

54
Q

How are class 4 NICs paid?

A

They they included in the self-assessment and paid in two instalments.

31st Jan and 31st July after the tax year in question

55
Q

When can self-employed people get credits for low pay?

A

They can’t but may be given in some circumstances such as during training periods.

56
Q

When will individuals stop paying NI if working abroad?

A

After 52 weeks

57
Q

How are NICs assessed for multiple jobs if the jobs are connected?

A

All the NICs are agrigated and classed as coming from one employer.

58
Q

For employees with multiple jobs that are not agregated but exceed the upper earnings level. How many weeks can NIs be charged at this rate?

A

53, then drops to 2%
Must be applied for.

People employed and self-employed can apply, but it is complicated and not covered in the exam.

59
Q

What are class 3 NIs

A

Voluntary contributions used to fill gaps in an individual’s contributions.

60
Q

What are class 3a contributions

A

Voluntary contributions open for a limited time to allow those who reached state pension age before 6 April 2016 to top up their entitlement.

61
Q

How are class 3s paid?

A

6 years from the year they relate to at the rate of the year paid.

Collected through direct debit or quarterly demand

Cannot be paid once reaching state pension age.

62
Q

What is the current rate for class 3 NI?

A

£17.45

Ro3 Personal Taxation (14 decks)

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