National Insurance Contributions

Question 1

what national insurance is payable by a self employed person?

Answer 1

• Class 2
• Class 4

Question 2

what national insurance is paid by an employee?

Answer 2

Class 1 primary (cash earnings eg. salary, bonus, vouchers)

Question 3

what national insurance is paid by an employer?

Answer 3

1. Class one secondary (cash earnings eg. salary, bonus, vouchers)
2. Class 1A (benefits)

Question 4

what is the annual profit limits for paying Class 2 NICs?

Answer 4

£12,570

Question 5

who pays Class 2 NICs and when is it due?

Answer 5

1. payable by sole traders and partners
2. payable through self assessment by 31st January following the end of the tax year ( 31st January 2025)

Question 6

what is Class 4 NICs paid on and when is it due?

Answer 6

• Paid on tax adjusted trading profits assessed for income tax
• Payable via payments on account/balancing payment with income tax

Question 7

when must a trader register with HMRC for Class 4 NIC and income tax?

Answer 7

5th October following the end of the tax year

Question 8

What is a payment on account?

Answer 8

self employed make installments only on income tax and Class 4 NICs not on capital gains or class 2 NICs

Question 9

when are payments of account due?

Answer 9

1. 1st payment on account - 31 January in tax year (31/01/24)
2. 2nd payment on account - 31 July following end of tax year (31/7/24)

Question 10

how is POA calculated?

Answer 10

50% of previous tax year payable by self assessment

Question 11

POA is not required when?

Answer 11

if amount of tax paid in previous year was <£1000 or <20% of total income tax and class 4 liability

Question 13

when is balancing payment due?

Answer 13

due on 31st January following end of tax year and includes unpaid income tax, unpaid self employed nics and capital gains tax
eg 31/01/25 and also includes POA from this current tax year

Question 14

when is penalty due and on what?

Answer 14

penalty on balancing payments and interest on POA/ balancing payments

Question 15

what NIC do employees pay?

Answer 15

pay class 1 primary contributions on cash earnings and vouchers for goods of services

Question 16

what NIC to employers pay?

Answer 16

class one secondary which include cash earnings and vouchers

Question 17

when are class one contributions due?

Answer 17

• 19th of each month
• extended deadline to 22nd for month electronic payment

Question 18

what is the rule for apprentices and young people?

Answer 18

have a lower class 1 secondary contribution

Question 19

what is the employment allowance?

Answer 19

• reduces class 1 secondary NIC liability for the employer
• £5000 per annum

Question 20

what if the employment liability is less than the allowance?

Answer 20

employer pays no secondary class 1 NIC

Question 21

the employment allowance is not available to employers which….

Answer 21

• companies with a single director and no other employees
• those with a class 1 secondary NIC liability > £100,000 in the previous tax year

Question 22

what is class 1A NIC?

Answer 22

• paid by employers on value of taxable benefits
• value of assessable benefit x 13.8%

Question 23

can employment allowance be offset against Class 1A NIC?

Answer 23

No

Question 24

when is Class 1A NIC paid?

Answer 24

paid annually by 19 July (22 July if paid electronically) following the end of the tax year