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NI Classes 1, 2 and 4
KiKi
Posts: 5,381 Forumite
in Cutting tax
Hi there
Hoping someone can help with a couple of very specific questions.
I am employed, and self employed. I pay 1, 2 and 4. My employed earnings are in the 20% bracket; my SE earnings don't take me into 40%.
Last year my SE earnings were around £4k but I didn't apply for the SEE at the time (I hadn't realised I could). I expect my total *profit* from self employed work this year to be around the £5k mark.
The forms and guidance are very clear that by not paying Class 2 you may lose your entitlement to some benefits.
My specific questions are:
a) If I apply for SEE and therefore don't pay Class 2, do my current Class 1 contributions mean that I don't lose the benefits referred to in HMRC's guidelines? (Not that I'm likely to use them!)
b) I'm not clear on what the SEE limit means, if you're employed as well. The form says "earnings after expenses". Elsewhere, on the same form, it says "net self-employed income (that is your profit after deducting expenses)". However! As I use all my tax-free allowance through employment, I pay 20% tax on all my SE earnings.
As NI isn't usually calculated after tax, I presume it means your earnings after expenses, but *not* after tax? But nowhere does it say 'gross' earnings, at all. If it's £5,595 after tax and expenses (ie, real profit) then I'll definitely be under. If it's £5,595 after expenses only, then I'm very borderline. Does anyone know?!
c) If I apply for and get SEE - then earn over the limit - will that just be adjusted when I complete my tax return, ie, I'll be asked to pay back the £2.65 a week for this year (that I haven't already paid)?
Thanks if anyone can help.
KiKi
Hoping someone can help with a couple of very specific questions.
I am employed, and self employed. I pay 1, 2 and 4. My employed earnings are in the 20% bracket; my SE earnings don't take me into 40%.
Last year my SE earnings were around £4k but I didn't apply for the SEE at the time (I hadn't realised I could). I expect my total *profit* from self employed work this year to be around the £5k mark.
The forms and guidance are very clear that by not paying Class 2 you may lose your entitlement to some benefits.
My specific questions are:
a) If I apply for SEE and therefore don't pay Class 2, do my current Class 1 contributions mean that I don't lose the benefits referred to in HMRC's guidelines? (Not that I'm likely to use them!)
b) I'm not clear on what the SEE limit means, if you're employed as well. The form says "earnings after expenses". Elsewhere, on the same form, it says "net self-employed income (that is your profit after deducting expenses)". However! As I use all my tax-free allowance through employment, I pay 20% tax on all my SE earnings.
As NI isn't usually calculated after tax, I presume it means your earnings after expenses, but *not* after tax? But nowhere does it say 'gross' earnings, at all. If it's £5,595 after tax and expenses (ie, real profit) then I'll definitely be under. If it's £5,595 after expenses only, then I'm very borderline. Does anyone know?!
c) If I apply for and get SEE - then earn over the limit - will that just be adjusted when I complete my tax return, ie, I'll be asked to pay back the £2.65 a week for this year (that I haven't already paid)?
Thanks if anyone can help.
KiKi
' <-- See that? It's called an apostrophe. It does not mean "hey, look out, here comes an S".
0
Comments
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Paying class 2 when you earn under the limit is voluntary. If you pay any class 1 NI or are credited with some NI contributions then you will not lose out by not paying class 2 NI.
The profit is after expenses not after tax. You can apply for a SEE and claim back any class 2 contributions you have made in the current tax year.:footie:
Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money. 0 -
That's ever so helpful, thanks so much.
KiKi' <-- See that? It's called an apostrophe. It does not mean "hey, look out, here comes an S".0
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