Nics

Question 1

What are nics and what factors determine them

Answer 1

Compulsory contributions to state social security system

Factors that determine level and type are
Employment status 
Age
Level of earnings
Residence status

Question 2

Who collects nics and when do they start

Answer 2

Hmrc collect and starting age is 16

Question 3

How many nic classes are there and what are their names

Answer 3

4 in total
Class 1 employee and employer percentage rates
Class 2 self employed
Class 3 voluntary
Class 4 self employed percentage rates

Question 4

What indicates that someone is employed

Answer 4

Contract of service
How and when work is done
Work done is integral to part of the business

Question 5

Nic contributions are taken from which kinds of earnings

Answer 5

Bonus, overtime, hol pay
Incentive pay to accept change to terms of employment
Mat, pat,shared parental,adoption and sick pay
Lump sum for joining or leaving
Payments for personal debt
Payments that can be converted to cash

Question 6

Are nics taken from shares

Answer 6

Yes if they can be converted to cash quick

However can leave some startup companies in trouble so employees can tax liability and can get tax relief on gain

Question 7

At what age does an employee start to pay nics

Answer 7

From 16 to spa after that they don’t pay but the employer has to still pay their part

Question 8

Name the thresholds that affect class 1 nics for employee and employer

Answer 8

Primary threshold is what the employee pays for class 1 nics. It starts at 162 a week

Secondary threshold is paid by the employer and this starts at 162 a week for employees above 21 and apprentice age above 25

Question 9

What is lower earning limit

Answer 9

Min level of earning that an employee loan have to contribute to state pension the amount is 116 per week

Question 10

What is upper earning limit

Answer 10

Max level of earnings an employee can make at the main rate.

amount is 892 per week

Question 11

What is upper secondary threshold and apprentice upper secondary threshold and what are their rates

Answer 11

Ust is for employees under 21

Aunt is for apprentice under 25

Both of them is at 892 a week

Question 12

Who uses the annual contribution rate

Answer 12

Only company directors

Question 13

How much is employee rate for class 1 nics

Answer 13

Rate is 12% and 2% above uel

Question 14

What is the employer rate

Answer 14

First 162 is free
After this it’s at 13.8%
892 for under 21 and under 25 if apprentice then 13.8%

Question 15

Explain employer alllowance

Answer 15

Entitled to 3000 a year ducted
from total secondary contribution

employee primary contribution are not affected by this

Only one deduction allowed where employers are connected and where one company controls another

Question 16

Explain what Married woman reduced rate is

Answer 16

If married before 6 April 1977 they would get a reduced rate this applied to widowed as well

Election no longer effective in the following divorce or annulment
remarriage
2 complete consecutive years with no earnings above LEL

Rate is 5.85% between lel and uel

Question 17

Who and how are nicks collected

What does the employer have to do as well

Answer 17

Hmrc get them
Collected via paye system

Employer is responsible

Class 1A are due on 22nd July after the end of the tax year but 19 July if done electronically

Benefits liable to class 1A have to be put on a P11D form

Question 18

What are the penalties for late payment

Answer 18

No late payment for first one in tax year unless six months late

Then at 1% of the late amount

5% charge on late payment that is six months late further 5% if 12 months late

Up to 3 penalties of 5% maybe charge my class 1A is late and initial Payment with full payment is not made within 30 days of the date of second with six months late and the third where 12 months late

Question 19

What are the EE a regulations

Answer 19

A person that is era national only pays in one state

Usually the country working in

Hey foreign employer can’t pay nics if obliged to pay similar in their own EEa state

Question 20

How does hmrc collect nics for someone coming in the UK

Answer 20

Will attempt to collect nics for people that work on a regular basis and if unclear then after 52 weeks

Question 21

How will hmrc collect nics from someone leaving the uk

Answer 21

If someone going to work abroad and their employer or company still in uk. Hmrc will collect nics for 52 weeks

Question 22

If director is a shareholder how can he reduce nics

Answer 22

They can do so via paying a salary through dividends as this saves payment of nics

Question 23

What special category is treated as employee nic payment but not income tax

Answer 23

Domestic workers
Agency workers
Lecturer or instructor
Labour only subcontractors

Question 24

When can someone be credited for nic payments

Answer 24

During periods of 
Full time training
Unemployment or sickness
Stat mat,pat,shared parent,adoption pay
When inc below primary but above or at lel

Question 25

What are the rules with associated employments

Answer 25

If there is a link between employments then the pay from all are aggregated as 1

Question 26

What are the max contributions in multiple employment

Answer 26

If more than 1 job then nic limit is annual uel minus annual lel multiply by 12%Therefore £46,350-£8,424)x12% = 3
4,55.12

Nic 2 is charged in excess over this limit

Question 27

Who pays class 2 and class 4 nics

Answer 27

Self employed

Question 28

Explain class 2 nic and what is the rate

Answer 28

Person who is over 16 and under spa
Charged at a flat rate for each week of £2.95
No nic due if profit below £6,205
Can choose to pay it voluntarily

Question 29

Explain class 4 nics and what is the rate

Answer 29

Earning related and same limit as class 2
Allowance can’t be used to deduct
Charged at income in that tax year
9% on profit between lel(8424) and uel(46,350)
2% on anything above uel

Question 30

When are class 2nnic collected

Answer 30

Full amount due in following year on 31 jan eg 2018/19 tax due on 2020

Question 31

When are class 4 nics collected

Answer 31

2 payments on account
31 jan in year of assessment
31 July in following year
Balancing payment on the following year on 31 jan

Question 32

What is class 3 nics

How long can they be paid for

What is the amount

Answer 32

These are voluntary contributions to fill in any gaps
Amount is 14.65 a week
Collected by hmrc quarterly or monthly by dB
Can’t pay if spa and above
Can be paid up to 6 yrs on related tax year

Question 33

What are nics payable on

Answer 33

They are paid on earned income and not savings or dividend

Question 34

Example of employee nic break down

Jen has weekly earning of 1,008, how much is her nics contribution

How much is her employers nic contribution

Answer 34

The first 162 a week is not subject to nics
Then take the uel minus the lel (892-162) is subject to 12% nic, so 730 x 12% = 87.6
As she is above the uel a further 2% charge is applied so 1008 - 892 = 116 x 2% = 2.32

Total nics is 89.92 for that week

Employer

The first 162 has no charge
Then the rest is charged at 13.8% so is 116.75 nics to be paid

If she was under 21 or an apprentice under 25 then the first 892 is free and then a charge on the rest would be applied so 16.01 nic payment per week

Question 35

Fringe benefits are subject to what class bracket

Answer 35

They are subject to employers and not employees class1a nics

This is a flat rate of 13.8%

Question 36

Are non taxable benefits like pension contributions and group income protection, are they liable to nics

Answer 36

No they are not

Question 37

When can someone choose not to pay class 2nnics

Answer 37

When they have an earnings of 6205 or less in 2018/19

Question 38

For the self employed can trading losses be carried forward? If so, why?

Answer 38

Yes they can as they can be set against future profits for class 4 nics purposes

Question 39

What is the maximum payable amount in class 4 nics

Answer 39

The max is 3,413.34

Done by taking the (uel 46,350 - lel 8,424) x 9%

Question 40

What is the maximum amount that some one pays class 1 employee nics annually before they pay 2%

Answer 40

This is 4,551 done by taking the (uel-lel)x12%

Question 41

As self employed pay both class 2 and 4 nics. What’s the combined total amount payable annually at main rate before the 2% charge kicks in

Answer 41

Class 2 is 2.95x52=153.40
Class 4 is (uel-lel)x9% - 3,413.34
Combined is 3,566.74

Question 42

If someone is both self employed and employed what is the max annual limit on class 4 nics payable at main rate

Answer 42

Max class 4 nics at the upper profits limit

Less

Min rate class 1 nics paid

Question 43

Who are eligible to pay class 3 nics

Answer 43

Those that are res in uk throughout the tax year concerned

Arrived in the uk during the tax year and were previously liable to class 1 or 2 nics

Have arrived during the tax year and been res in uk for 26 weeks