National Insurance Flashcards
Explain the classes of NI, who pays them and how?
Class 1 Employees and Employers % via PAYE
Class 1a Employers Only % on BIK via P11D and P11D (b)
Class 2 Self Employed flat rate via Self Assessment
Class 3 Voluntary flat rate via a Monthly or Quarterly DDI
Class 4 Self Employed % Self Assessment
During what ages are NI contributions paid for
(1) Employers
(2) Employees and Self Employed
(1) Age 16 until stop working
(2) 16 to SPA
NI is paid on assets that can easily be converted into…. except ….
Cash / Approved Profit (Sharing, Option, Incentive plans)
Which State Benefits are based on class 1 NI contributions?
(1) Contribution-based Jobseeker’s
(2) Contribution-based Employment and Support (ESA)
(3) Bereavement
(4) Maternity
(5) State Pension (35 years for full)
What three types of payment are not liable to NI?
Redundancy
Compensation
Damages
Approved share schemes
Which State Benefit does not qualify from class 2 NI contributions?
Contribution based Job Seekers
Which State Benefit qualifies from class 3 NI contributions?
State Pension
Which State Benefits qualifies from class 4 NI contributions?
None
Can employers deduct NI from profit for tax purposes?
Yes
What NI do employers have to pay for all employees under 21 or if they are under 25 and an apprentice?
Only pay on earnings above the Upper Secondary Threshold £962 (Same as UEL)
What is the minimum level of earnings to qualify for contributory based benefits?
Lower Earnings Limit (LEL) £118
On what rates and bands do employees pay class 1 NI?
12% (main rate) on earnings above the Primary Threshold £962 - £166
2% on earnings above the UEL of £962
What rate or rates and band do employers pay class 1 NI
13.8% on £962 - £166
Who pays class 1a and at what rate?
Employers only at 13.8%
Employers are not required to pay NI on the first £3,000 of contributions, known as the employer allowance, name one situation that is not eligible and one that is?
Companies where the director is the sole employee can’t claim.
A individual employing a care or support worker can claim
Class 1 is based on employee pay patterns I.e weekly/ monthly rather than the tax year except for …..
Directors who all have an annual pay period.
£50,000 - £8632 x 12%
£50,000 x 2%
What is the EEA principle?
Only pay NI in one state although the rules are complex.
Who is a Primary and who is a Secondary NI contributor
Primary = Employees Secondary = Employers
How can shareholder directors avoid NI and what other impact does it have?
By receiving an income instead of dividends, although will reduce allowable pension contributions.
The Anti Avoidance IR35 rules stop personal services companies working for one client claiming to be a separate company rather than an employee to pay dividends and avoid PAYE and NI (known as disguised employment). If IR35 applies what is the impact?
Must pay PAYE and NI
Which occupations are treated as employees for NI?
Domestic workers Office Cleaners Agency workers Lectures Film and TV workers
Who receives NI credits when not working?
Unemployed benefits
Approved training scheme
Jury service
Wrongly in prison
Men aged between the state pension age for women and 65
Caring for a child or someone sick or disabled
If an employee has multiple employments all paying income below the primary threshold they could avoid paying NI altogether, how is this treated by HMRC?
They can aggregate where there is a clear link between employers known as associated earnings and treat as if they were one salary
How do HMRC ensure someone with multiple occupations doesn’t over pay NI?
At the end of the year the total amount paid is compared to the maximum amount payable.
Class 2 is a weekly contribution paid by the self employed when net profits are above the small profits threshold £6365 and ……. it is paid by …….
If voluntarily paid /31st January and 31st July
Class 4 is a % of net profit before pension…
premiums and certain other deductions
*Trading losses can be carried forward and off set to reduce tax and NI
Which self employed occupations have special rules for NI?
Share fishermen on a British Boat pay NI even if work outside UK
Sub Post Masters self employed for shop profits
If high employed and self employed earnings in the same tax year?
They only have to pay the maximum on the main rate
Class 3 voluntary to plug gaps for benefit entitlement, what are the four rules?
Can only be paid if you have insufficient class 1 or 2 in the year being paid for
Can only be paid 6 years after
Cannot be paid in the same year attaining state pension
Must meet residency requirements
Can pay when abroad if previously UK resident
