National Insurance contributions
There are 4 different types of National Insurance that employees or the self-employed can pay and there is often a great deal of misunderstanding about who is to pay what type of National Insurance, and how the calculation of the liability comes about.
The following is a brief introduction to the various types of National Insurance that may be due.
The is paid by employees only and for 2014/15 is payable at 12% on all earnings above £153 per week up to £805 per week, and at 2% on everything above £805 per week. The monthly limits are £663 and £3,488.
Your employer will calculate and deduct the correct amounts from your wages and remit them to HMRC, and pay employers NI at a different rate.
Anyone who is self-employed is liable to pay Class 2 National Insurance which is a flat rate charge for 2014/15 of £2.75 per week and this covers the basic level of benefits that you will receive if you are unable to work or are injured at work.
Self-employed share fishermen pay £3.40 per week for 2014/15 to reflect the less regular nature of their self-employment.
If you earn less than £5,885 for 2014/15 then you can opt not to pay Class 2 National Insurance, but this is usually only beneficial if you are receiving Child Benefit, as you are credited for National Insurance automatically by virtue of receiving Child Benefit.
Class 4 National Insurance also applies only to the self-employed.
If you earn more than £7,956 from self-employment in 2014/15 then you are due to pay Class 4 National Insurance in addition to Class 2. This is charged at 9% of your profits between £7,956 and £41,865 plus 2% of everything above this.
Class 3 National Insurance is for voluntary contributions where someone has missed a year of contributions either because they were working outside the Uk or they were not working at all.
Again if you are receiving Child Benefit then your National Insurance should be paid automatically.
If you are employed and self-employed then you may pay Class 1, 2 & 4 National Insurance. If the total payments are in excess of the upper limits, then HMRC will automatically refund the excess to you, but it is possible to defer some of the payments. You will need specialist advice to compute the most you need to pay.
To get more information about National Insurance and the current rates that apply, you should download our free TaxApp from either the App Store or the Google Play Store. The TaxApp also has full details of other taxes and allowances and is updated monthly with the latest news and details of any changes.
Glasgow: 0141 237 3878
Kilmarnock: 01563 578900
Stornoway: 01851 700362
Login to OpenSpace
Our clients say…
Hi Sue. You really are God’s gift!! The money wasted on [the previous accountant] makes me blood boil. You suggestion re invoicing so can claim back vat is wonderful. Will look forward to receiving invoice. Hope you all have a good week end.
Stables owner Nr Eaglesham April 2, 2015
Recent blog posts
- CIS Refunds May 23, 2017
- Victory at a VAT Tribunal May 14, 2017
- Limited Cost Traders – FRS VAT implications for FRS April 21, 2017
- Cyber Security – keeping your data safe April 17, 2017
- Scottish Tax rates differ from the rest of the UK December 15, 2016
Tax openness is A Good Thing. Isn't it? twitter.com/bbcworld…
If you have to wear a uniform to work, then you are entitled to tax relief on the cost of uniform and laundry. #SimpleTaxAdvice
Idiot suggestion from someone who has never had a real job -Taylor Review: UK should end cash in hand economy bbc.co.uk/news/busin…