National Insurance Contributions Flashcards
What are the types of NIC and who does it affect
Class 1 Primary- Employee Class 1 Secondary- Employer Class 1 A Employer Class 2- ST Class 4 ST
What is class 1 NIC Primary paid on (generic) and who pays for this?
Employees are charged on this for their cash earnings but the employer pays on their behalf
What are the list of income that is included in class 1 NIC Primary?
Class 1 Primary
Employees pay this on ‘cash earnings’. This includes
- Any remuneration derived from employment and paid in money. i.e. Salary, bonuses
- Includes vouchers exchangeable for cash or goods
- Reimbursement of cost of travel between HOME AND WORK
What are the list of income that are NOT included in class 1 NIC Primary?
This does not include
- Exempt employment benefits
- non cash benefits
- Reimbursement of business expenses
- Mileage allowance up to 45p per mile. The number of mile doesnt matter so don’t split to 10 and above (and 25p). Here, if it is above 25p then it WILL be included
How and when is Class 1 primary paid?
✓ Contributions are collected collected by the employer through the PAYE scheme.
under PAYE by 22nd following tax month end. This is done MONTHLY
What NIC are payable by the employer?
Employers Class 1 Secondary
AND Class 1A
What is Employers class 1 Secondary and what is it paid on?
This is for the privilege of having staff.
payable on ‘cash earnings’ same as employees. This includes
- Any remuneration derived from employment and paid in money. i.e. Salary, bonuses
- Includes vouchers exchangeable for cash or goods
- Reimbursement of cost of travel between HOME AND WORK
What are important things you must remember with Class 1 secondary
Employment allowance is available if you are a small business.
It is an allowable trading expense for tax purposes.
What is the an employment allowance and what is it allowable on?
When is it not allowed?
Employment allowance is available if you are a small business.You can claim Employment Allowance if you’re a business or charity (including community amateur sports clubs) and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.
£3,000 PER TAX YEAR deducted from employer’s Class 1 NIC ONLY and claimed through PAYE
When there is a director who is the only employee
How and when is Class 1 secondary paid?
This is payable through PAYE system.
Payable under PAYE by 22nd following tax month or 19th of the next month if not paid electronically. This is done MONTHLY
What is class 1A and what is it paid on, examples
Payable on:
✓ Taxable benefits- all NON CASH BENEFITS
- accommodation
- car
- fuel
- loan
- Events costing over £150 pp
- Membership of local sports club costing ££ per annum
What are important things you must remember with Class 1A
It is an allowable trading expense for tax purposes and only paid ONCE A TAX YEAR
How and when is Class 1A paid?
The employer’s class 1A is payable on the 22nd July 2020 if paying electronically
Class 1- what in general is this charged on?
Salaries
What NIC are paid by a self employed person who has employees?
Class 2 and Class 4 in respect of their unincorporated trade and
Employers Class 1 and Class 1A NIC in respect of earnings and benefits provided to employees
What is class 2 NIC and How much is it?
Payable on nothing.
This is for self employed individuals.
It is a Fixed rate of £3.00 per week.
How and when is class 2 NIC paid
✓ Payable under the self-assessment the payment is on 31 January following the tax year
It is paid at the same time as the balancing payment for income tax under self assessment. Payment is on 31 Jan following the tax year 19/20… 31 Jan 2021
What is class 4 NIC and what is it payable on (be specific!!)?
This is for self employed individuals.
Payable on:
- Tax adjusted trading profits AFTER b/f trading losses.
How and when is class 4 NIC paid
Paid at the same time as income tax under self assessment
✓ Payable under the self-assessment the payment is on 31 January following the tax year. 19/20… 31 Jan 2021
What are important things you must remember with Class 2 and class 4
They are NOT an allowable deduction against the trading profits of the business
What are important things you must remember with Class 1 Secondary and Class 1 A paid y the employer/sole trader employing an individual
IT IS AN ALLOWABLE deduction against the trading profits of the business
when working out the cash earnings, what is very important to remember that is not deductable?
For NIC purposes, Occupational pension scheme are not deductable!!!
When calculating the excess mileage, what must you remember for NIC purposes?
The excess mileage allowance above the AMAP of 45p per mile (regardless of the number of business miles) is subject to class 1 NIC
12kmiles * *(50p-45)
When working with trading profit, what is very important to remember?
BASIS OF ASSESSMENT!!
When do you not have to pay certain NIC and which specific ones?
Employee’s Class 1
Class 4
What is the small profit threshold?
£6,365
Given in the rates table!!!
Where is mileage from home to travel charged and where is it not?
The mileage allowance paid for normal home to work commuting is a taxable cash benefit which is subject to Class 1 NIC, not Class 1a NIC
State how employers are required to report details of employees’ taxable benefits to HMRC following the end of the tax year and the deadline for submitting this information for 19/20
Details of employees’ taxable beenfits are reported to HMRC using form p11D for each employee. The p11D submission deadline for 19/20 is 6th July 2020
Are dividends deductable for corporation tax and what else must you remember
Dividends are not an allowable deduction from profits and they are not subject to employee or employers NIC
When must a company provide each employee with a year end summary form (P60) ?
By 31st May following the tax year
Under Real Time Information, when must a company submit income tax and NIC information in respect of the monthly salary payments to HMRC electronically?
By the 15th day of each month.
If a company pays income tax and NIC due on the monthly salary payments to HMRC electronically, when must it make the payments by?
The 22nd of the month following the month the salaries are paid. Employers with more than 250 employees must pay their PAYE payments electronically. Smaller employees have a choice
