Ubderstanding class 4 nic contribution

cg1701

Hi, hope this is in the right place. But can somebody help please. I have received a worrying letter from the tax office and I was certain I had worked out everything OK.

With regards class 4 nic contributions, do you work it out like this:

Gross made = £10563.52
Minus tax threshold of £6475.00
Equal = £4088.52

So do I pay class 4 nic on £4088.52?

Would really appreciate your help.

Many thanks in advance

CLAPTON

No

assuming you are talking about 2010-11 then you pay NI on
10563 - 5,715

the allowance for NI is different to the tax allowance

cg1701

Hi Clapton thanks for getting back It is the 2009/2010 tax year.

So it is £10563.52 minus £5075 (nic class 4 threshold) = £5488.52 and I would have to pay 8% of that?

Hardly seems worth working for yourself all this money to pay out. Why don't they make it more clear and just day class 4 nic is in fact extra tax!!!

Thanks for your help.

CLAPTON

cg1701 wrote: »

Hi Clapton thanks for getting back It is the 2009/2010 tax year.

So it is £10563.52 minus £5075 (nic class 4 threshold) = £5488.52 and I would have to pay 8% of that?

Hardly seems worth working for yourself all this money to pay out. Why don't they make it more clear and just day class 4 nic is in fact extra tax!!!

Thanks for your help.

the threshold for 2009/10 was 5,715 but yes you pay 8% of the amount greater than that

of course NI is a tax but if you were under PAYE you would pay 11% rather than 8% although you would be entitled to additional benefits

cg1701

CLAPTON wrote: »

the threshold for 2009/10 was 5,715 but yes you pay 8% of the amount greater than that

of course NI is a tax but if you were under PAYE you would pay 11% rather than 8% although you would be entitled to additional benefits

What are the additional benefits? And can a self employed person be on PAYE?

BoGoF

Class 1 NIC, which employees pay counts towards certain benefits whereas Class 4 NIC does not. And no a self-employed person can't be PAYE although you could consider forming a Ltd company.

As an aside you really didn't think the Class 2 NIC of £2.50 per week was all you would have to pay for NIC.

leveller2911

BoGoF wrote: »

Class 1 NIC, which employees pay counts towards certain benefits whereas Class 4 NIC does not.

As an aside you really didn't think the Class 2 NIC of £2.50 per week was all you would have to pay for NIC.

Very true but any idea why Self employed pay an additional "National insurance " stamp(class 4) and yet receive no benefit entitlement from it?...It does make you wonder why they call class 4 a "National insurance " when in fact its just another tax.;)

When paying Class 2 NI stamps SE receive a lower benefit entitlement than those on PAYE but in addition the SE also pay Class 4 NI tax....Makes my blood boil.....

CLAPTON

leveller2911 wrote: »

Very true but any idea why Self employed pay an additional "National insurance " stamp(class 4) and yet receive no benefit entitlement from it?...It does make you wonder why they call class 4 a "National insurance " when in fact its just another tax.;)

When paying Class 2 NI stamps SE receive a lower benefit entitlement than those on PAYE but in addition the SE also pay Class 4 NI tax....Makes my blood boil.....

Clearly it's absurb that a couple of quid aweek (class 2) give so many benefits... totallay unfair to PAYE people who pay 12% of their salary over the threshold

should stop this and only make class 4 contributions count; then your blood wouldn't boil so much

John_Pierpoint

CLAPTON wrote: »

Clearly it's absurb that a couple of quid aweek (class 2) give so many benefits... totallay unfair to PAYE people who pay 12% of their salary over the threshold

should stop this and only make class 4 contributions count; then your blood wouldn't boil so much

NI is just another tax.

http://en.wikipedia.org/wiki/Tax

What are these wonderful benefits that I might qualify for by paying "2 quid a week" for a working lifetime?

CLAPTON

John_Pierpoint wrote: »

NI is just another tax.

http://en.wikipedia.org/wiki/Tax

What are these wonderful benefits that I might qualify for by paying "2 quid a week" for a working lifetime?

NI is of course just another tax in the sense that the money is not ring fenced for specific purposes.
However payment of NI does influence one benefits... need thirty years payment for full state pension; second state pension depends upon amount of NI paid; entitlement to earning related JSA etc etc.

you need to look up the benefits systems to understand the linkage.

donquine

You might find the following link helpful: http://www.hmrc.gov.uk/ni/intro/benefits.htm#2

It is of course possible to avoid paying IT and NI if you set up a limited company and pay yourself dividends, but the flip side is, that's the stage where you'll need to start paying for professional advice just to deal with the mandatory compliance and paper shuffling. Can't say I'd recommend it to you with your sort of profit figures, but that's why many people working for themselves who earn more manage to stay in the game!