Nics Flashcards
What are nics and what factors determine them
Compulsory contributions to state social security system
Factors that determine level and type are Employment status Age Level of earnings Residence status
Who collects nics and when do they start
Hmrc collect and starting age is 16
How many nic classes are there and what are their names
4 in total Class 1 employee and employer percentage rates Class 2 self employed Class 3 voluntary Class 4 self employed percentage rates
What indicates that someone is employed
Contract of service
How and when work is done
Work done is integral to part of the business
Nic contributions are taken from which kinds of earnings
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
Are nics taken from shares
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
At what age does an employee start to pay nics
From 16 to spa after that they don’t pay but the employer has to still pay their part
Name the thresholds that affect class 1 nics for employee and employer
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
What is lower earning limit
Min level of earning that an employee loan have to contribute to state pension the amount is 116 per week
What is upper earning limit
Max level of earnings an employee can make at the main rate.
amount is 892 per week
What is upper secondary threshold and apprentice upper secondary threshold and what are their rates
Ust is for employees under 21
Aunt is for apprentice under 25
Both of them is at 892 a week
Who uses the annual contribution rate
Only company directors
How much is employee rate for class 1 nics
Rate is 12% and 2% above uel
What is the employer rate
First 162 is free
After this it’s at 13.8%
892 for under 21 and under 25 if apprentice then 13.8%
Explain employer alllowance
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
Explain what Married woman reduced rate is
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
Who and how are nicks collected
What does the employer have to do as well
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
What are the penalties for late payment
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
What are the EE a regulations
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
How does hmrc collect nics for someone coming in the UK
Will attempt to collect nics for people that work on a regular basis and if unclear then after 52 weeks
How will hmrc collect nics from someone leaving the uk
If someone going to work abroad and their employer or company still in uk. Hmrc will collect nics for 52 weeks
If director is a shareholder how can he reduce nics
They can do so via paying a salary through dividends as this saves payment of nics
What special category is treated as employee nic payment but not income tax
Domestic workers
Agency workers
Lecturer or instructor
Labour only subcontractors
When can someone be credited for nic payments
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
What are the rules with associated employments
If there is a link between employments then the pay from all are aggregated as 1
What are the max contributions in multiple employment
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
Who pays class 2 and class 4 nics
Self employed
Explain class 2 nic and what is the rate
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
Explain class 4 nics and what is the rate
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
When are class 2nnic collected
Full amount due in following year on 31 jan eg 2018/19 tax due on 2020
When are class 4 nics collected
2 payments on account
31 jan in year of assessment
31 July in following year
Balancing payment on the following year on 31 jan
What is class 3 nics
How long can they be paid for
What is the amount
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
What are nics payable on
They are paid on earned income and not savings or dividend
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
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
Fringe benefits are subject to what class bracket
They are subject to employers and not employees class1a nics
This is a flat rate of 13.8%
Are non taxable benefits like pension contributions and group income protection, are they liable to nics
No they are not
When can someone choose not to pay class 2nnics
When they have an earnings of 6205 or less in 2018/19
For the self employed can trading losses be carried forward? If so, why?
Yes they can as they can be set against future profits for class 4 nics purposes
What is the maximum payable amount in class 4 nics
The max is 3,413.34
Done by taking the (uel 46,350 - lel 8,424) x 9%
What is the maximum amount that some one pays class 1 employee nics annually before they pay 2%
This is 4,551 done by taking the (uel-lel)x12%
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
Class 2 is 2.95x52=153.40
Class 4 is (uel-lel)x9% - 3,413.34
Combined is 3,566.74
If someone is both self employed and employed what is the max annual limit on class 4 nics payable at main rate
Max class 4 nics at the upper profits limit
Less
Min rate class 1 nics paid
Who are eligible to pay class 3 nics
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
