Seminar 7 Flashcards
NIC’s = ?
national insurance contributions
who pays NIC’s?
self employed people
employers
employees
what are NICs used for?
used by the government to fund state benefits
e.g., jobseekers allowance & state pensions
when do people receive national insurance numbers?
when they turn 16
who pay class 1 NICs?
employees and their employers as a percentage of employee’s earnings
who pay class 1A NICs?
employers on the taxable benefit for employees
who pay class 2 NICs?
self employed people pay a flat rate
who pay class 4 NICs?
self-employed people as a percentage of their taxable profits
who are primary/secondary in the payment of class 1/1A NIC’s?
primary = employees
secondary = employers
how are class 1 contributions paid?
under the PAYE system
how are class 1A contributions paid?
electronically by 22nd July following the tax year to which they relate
how are class 2 contributions paid?
under the self-assessment system
how are class 4 contributions paid?
under the self-assessment system
at what age are employees applicable for class 1 NICs?
between 16 and 66 (state pension age)
employers still pay NICs on employees over 66, but don’t pay NICs on employees under 16
what elements of income are class 1 NICs calculated on?
monetary earnings
e.g., salary, commission, bonuses, vouchers
contribution period = ?
the period for which the employee is paid
e.g., if employer is paid monthly, NIC is calculated monthly
are NICs calculated on non-cumulative basis?
yes
NICs are calculated on non-cumulative basis, so only earnings from the current contribution period are considered when calculating amount payable
how are NICs for company directors assessed?
annual basis
at what percentage do employees primary class 1 contributions?
12% for the earnings between 12,570 per year and 50,270 per year
2% on any earnings above the 50,270
what is the primary threshold for class 1 NICs?
12,570 per year, 1048 per month, 242 per week
what is the upper earnings limit for class 1 NICs?
50,270 per year, 4189 per month, 967 per week
if employee receives additional payments, how do you calculate the NICs?
in relation to weekly or monthly
because the earnings aren’t the same over the whole year
at what percentage are secondary contributions payable by the employers?
13.8% on all earnings exceeding the secondary threshold
secondary class 1 contributions aren’t payable by employees, only employers
what is the secondary threshold for class 1 NICs?
9,100 per year, 758 per month, 175 per week
what is the upper secondary threshold?
50,270 per year, 4189 per month, 967 per week
employers don’t have to pay for earnings up to the upper secondary threshold for employees under 21 or apprentices under 25
can employers get an employment allowance?
yes
5,000 per annum is deducted from their secondary class 1 NICs liability
if employer’s total secondary class 1 NIC liability for all employees is less than 5,000, what happens?
employer pays no secondary class 1 NIC for the year
who isn’t employment allowance available to?
isn’t available to companies with no employees
isn’t available to businesses with over 100,000 NIC liability in the previous year
should i assume that employment allowance is applicable to secondary class 1 NICs?
yes
are benefits in kind included in class 1 NICs?
no, they’re part of class 1A NICs
employers pay class 1A NICs on benefits in kind at 13.8%
vouchers are subject to…
class 1
not class 1A
because it’s classed as monetary income
how do class 2 NICs work?
between 16 (minimum age) and 66 (state pension age) pay a flat rate of £3.15 per week of self-employment
class 2 NICs aren’t required if profits for the year are less than small profits threshold of 12,570
paid through self-assessment system
how do class 4 contributions work?
self employed people pay class 4 NICs in relation to their profits
9% of taxable profits between 12,570 and 50,270
2% of taxable profits above 50,270
individuals must pay class 4 contributions if aged 16 or over at the start of the tax year and cease to be liable if aged 66 at the start of the year
collected alongside income tax liability for the year
