National Insurance Contributions

Question 1

The 2 NI types: Self employed individuals
(Sole traders and partners)

Answer 1

Class 2
Class 4

Question 2

Class 2/4 NI: Who pays:

Answer 2

Sole traders and partners
Aged 16-65

Question 3

Class 2 NI: Paid on what

Answer 3

Profit for tax year
If over small profits threshold

Question 4

Class 4 NI: Paid on what

Answer 4

Tax adjusted trading profits
That are assessed for income tax

Question 5

Class 2 NI: Calculations

Answer 5

Flat rate of £3.05 p/w

Question 6

Class 2 NI: Annual small profits threshold

Answer 6

£6,515

Question 7

Class 4 NI: Calculations

Answer 7

Profits between:
9,658
50,270
=
9%

Profits thereafter:
2%

Question 8

Class 2 NI: Due date

Answer 8

Via self-assessment system
(I.e. by 31 Jan after end of tax year)

Question 9

Class 4 NI: Due date

Answer 9

Via payment on account/balancing payment
With income tax

Question 10

When should a trader register with HMRC for NIC (and IT)?

Answer 10

Before:
31 Jan
After end of tax year
In which trade commences

Question 11

Calculating NI: Rounding system

Answer 11

Round to nearest point
At each stage of workings

Question 12

POA

Answer 12

Payments on account

Question 13

POA use

Answer 13

Self employed need to make POAs
For:
IT
and
Class 4 NI

(Never class 2 NI)

Question 14

2 types of POA due dates

Answer 14

1. First POA
2. Second POA

Question 15

POA due date: First POA

Answer 15

31 Jan
In tax year

Question 16

POA due date: Second POA

Answer 16

31 Jul
After
End of tax year

Question 17

What is each POA calculated based on

Answer 17

50% of
Previous year’s
Tax payable by self assessment

E.g. POA for 21/22 is based on 20/21 tax year

Question 18

When are no POAs required

Answer 18

Amount of tax paid in prev tax year under self-assessment
Less than:

£1,000
Or
Less than 20% of
Total income tax and class 4 NI liability

Question 19

NI balancing payment due date

Answer 19

31 Jan
After end of tax year

Question 20

NI balancing payment: For:

Answer 20

1. Unpaid income tax
2. Unpaid self-employed NICs
3. CGT

Question 21

NI: Late payment penalty applies to:

Answer 21

Balancing payments
(Not POAs)
(In TTS)

Question 22

Is late payment interest also payable for late tax and penalties (NI)?

Answer 22

Yes

Question 23

NI: Late payment interest: Date

Answer 23

Runs from:
Due date
To
Date payment made

(The period between those dates)

Question 24

Class 1 Primary NI: Who pays

Answer 24

Employees
16-65 y.o.

Question 25

Class 1 Secondary NI: Who pays

Answer 25

Employers
Aged 16 onwards

Question 26

Class 1 NI: Primary and Secondary: Paid on what

Answer 26

Cash earnings
(Before deductions)
Plus vouchers exchangeable for cash, goods or services

Question 27

Class 1 Primary and Secondary NI: Calculation: When?

Answer 27

Each time the employee is paid

Question 28

Class 1 Primary NI: Calculation rates

Answer 28

0%
On earnings up to:
£184 p/w
(797p.m.)

12%
On earnings between:
£184 and £967 p/w
(797 and 4,189 p.m.)

2%
Thereafter

Question 29

Class 1 secondary NI: Calculation rates

Answer 29

0%
On earnings up to:
£170 p.w. (737 p.m.)

13.8%
On earnings over this

Question 30

Class 1 primary and secondary NI: Due date

Answer 30

By 19th
Of each month

Question 31

Class 1 primary and secondary NI: How is it paid?

Answer 31

PAYE

Question 32

Class 1 primary and secondary NI: Payment method: Employers with 250+ employees

Answer 32

Electronically

Question 33

Class 1 primary and secondary NI: Payment method: Employers with less than 250 employees

Answer 33

Can choose
Electronically or written

Question 34

Class 1 primary and secondary NI: Payment method: Average monthly total PAYE (IT + NICs) is £1,500 or less

Answer 34

Can pay quarterly

Question 35

Calculating class 1 primary NIC if employee paid evenly throughout the tax year

Answer 35

Acceptable to use annual limits

Question 36

Class 1 primary NIC ANNUAL limits

Answer 36

12%
£9,568 to
£50,270

2%
Thereafter

Question 37

Class 1 primary and secondary NI: Payment method: If one week/month an employee receives an additional payment
E.g. bonus

Answer 37

Must calculate NICs weekly/monthly

Question 38

Class 1 secondary NIC: For:
Employees under 21
Apprentices under 25

Answer 38

0%
On earnings up to:
£967 p.w. (4,189 p.m.)

12.8%
Thereafter

(Assume not unless told otherwise)

Question 39

Calculating total class 1 secondary NIC payable for the tax year in relation to a particular employee: When it is acceptable to use annual limits

Answer 39

Always
Whether or not an employee is paid evenly throughout the tax year

Question 40

Class 1 secondary NI: ANNUAL limits

Answer 40

13,8%
On earnings above
£50,270 p.a. (Lower rate)
£8,840 p.a. (Higher rate)

Question 41

Class 1 secondary NI: Employment allowance

Answer 41

£4,000 p.a.
Per employER

Question 42

What happens if the employer’s NI Class 1 secondary liability is less than the employment allowance

Answer 42

No NI secondary class 1 paid

Question 43

Class 1 secondary NI: Employment allowance: Not available for:

Answer 43

1. Companies
   With a single director
   And no other employees
2. Individuals
   With a class 1 secondary NI liability
   At or over
   £100,000
   In the previous tax year

Question 44

In the exam: When to include NI class 1 secondary employment allowance

Answer 44

Always

UNLESS
Told otherwise
Or
Not available

Question 45

Class 1A NI: Paid by

Answer 45

Employers (only)

Question 46

Class 1A NI: Paid on what?

Answer 46

The value of
Assessable benefits
Excluding vouchers exchangeable for cash, goods or services (As liable for class 1)

Question 47

Class 1A NI: Calculation

Answer 47

13.8%
X
Value of assessable benefit
(Calculated same was as IT)

Question 48

Can the employment allowance be offset against class 1A NIC?

Answer 48

No

Question 49

Class 1A NI: Paid how regularly?

Answer 49

Annually

Question 50

Class 1A NI: Deadline: Not paid electronically
Not in tax tables

Answer 50

By 19 July
Following end of tax year

Question 51

Class 1A NI: Deadline: Paid electronically
Not in tax tables

Answer 51

By 22 July
Following end of tax year