National Insurance Contributions

Question 1

What are national insurance contributions?

Answer 1

Liability of the government to pay state benefits

Question 2

What are the classes of national insurance?

Answer 2

1 - paid by employees/ers -collected by PAYE
1A - paid by employers - by 22 July electronically
4 - paid by self-employed - in self-assessment

Question 3

What is class 1 primary NIC?

Answer 3

16th bday to state pension age

Question 4

What is class 1 secondary NIC?

Answer 4

Employers pay to employees
Age bands
Includes all earnings bar taxable benefits
Calculated before allowable deductions

Question 5

What is the lower earnings limit?

Answer 5

£6396 pa accrue entitlement to contributory state benefits - no NIC paid until over threshold

Question 6

What is the employment allowance and what is it not available to?

Answer 6

Employer can reduce liability to NIC by £5000 pa
Single director companies with no employees
Businesses with total class 1 NIC >100,000 in prev yr

Question 7

What are class 1A contributions?

Answer 7

Paid by employer to employees at 13.8%

Question 8

What are class 4 contributions?

Answer 8

Self-employed pay on taxable trading profit
Each partner in partnership responsible to pay based on own share of profits

Question 9

How do the self-employed pay NIC?

Answer 9

Most register as self-employed by 5th October following tax year self-employment commenced