Confusion over class 4 NI

Mr.Alex_2

Hi,

I'm sorry if this has been asked/answered before!

I'm a bit confused about the difference between the 40% tax threshold and the upper limit for class 4 National Insurance.

Am I right in assuming that:

• The 40% tax threshold is £34,800?
• But the upper limit for class 4 National Insurance is £40,040 at which point it drops from 8% to 1%?
• So between £34,800 and £40,040 you pay 48% for the two?
• Then above £40,040 you pay 41% for the two?

Just trying to get my head around how what provisions to put aside (I'm self employed).

Thanks

sdooley

You have your personal allowance plus the basic rate amount of £34,800 for income tax. This applies to wage income, then savings income, then capital gains, then dividends. Only wage income has NIs.

The upper limit for NI is on all wage income, it does not have the income tax personal allowance. I don't know how it works for self-employed people but for the employed, it's on a weekly basis so you pay some NIs (but not tax) even if you don't work for most of the year (e.g. when I was a student).

Mr.Alex_2

Thanks sdoodley.

Just to clarify, the threshold for the 40% rate is actually £40,835 (£34,800 plus £6035 (personal allowance), rather than £34,800 (what I had thought)?