Unexpected bill for Class 4 contributions for 2011-2012.. can anyone help?

mickym

Tax return first timer here.

In the year 2011-2012 I earned £31499 in my Full time job (PAYE).... and earned £1899 in some freelance work.

Dont have any other income from shares, big savings, property etc, and didnt have any expenses to claim.

Yet at the end of my return I am being asked to pay £380 for

'Class 4 NIC and Student loan due for 2011-12'

Looking here:

http://www.hmrc.gov.uk/working/intro/class4.htm

which states

The amount of Class 4 National Insurance contributions you have to pay for any tax year is based on your profits for that year. You pay 9 per cent on annual profits between £7,605 and £42,475 (2012-13) and 2 per cent on any profit over that amount.

I only earned a profit from my freelancing of £1899... so why do i need to pay? I remember talking to a HMRC representative when i started freelancing and they said if i was only earning a few thousand from freelancing I wouldnt have to pay Class 4.

During filling out the Online Tax Return process I selected that I WASNT exempt from Class 4 as I didnt meet the requirements in their Help Pop Up Window that stated:

You are exempt from paying Class 4 National Insurance contributions (NICs) if:

on 6 April 2011 you were:

at or over State Pension age at the beginning of the year of assessment (including if you reach State Pension age on 6 April)

under 16

during 2011-12 you were not resident in the UK for tax purposes (if you are not sure please contact HM Revenue & Customs (HMRC) or your tax adviser)

Can someone please advise me?

Many Thanks

InsertWittyName

Are you sure it's for Class 4 NIC and not for student loan? Do (or did) you have a student loan?

jimmo

You definitely don’t have any liability to Class 4 NICs so the problem is almost certainly related to Student Loan repayments.

I am not terribly familiar with them but for your self-employment alone, the bill should be (£1899 @ 9%) £170.91

The rest is possibly down to variations in pay over the year and you will need to give monthly details of gross pay and student loan deductions to make sense of it.

mickym

Had a student loan years ago and paid it off from what I believe.

Have letter from Student Loans company saying my account was closed on May 2006

InsertWittyName

In that case I would definitely double check over your SA form in full and ensure you've filled it in correctly.

mickym

Please note the part of my original post... where I said that I selected that I WASNT exempt from Class 4.... as the reasons for being exempt from Class 4 shown on the online tax return process:

You are exempt from paying Class 4 National Insurance contributions (NICs) if:

on 6 April 2011 you were:

at or over State Pension age at the beginning of the year of assessment (including if you reach State Pension age on 6 April)

under 16

during 2011-12 you were not resident in the UK for tax purposes (if you are not sure please contact HM Revenue & Customs (HMRC) or your tax adviser)

didnt apply to me.

Should I change this to being 'I am exempt'?

I would of thought that I wasnt exempt due to my circumstances, but my profit of £1899 made in my freelance work made me exempt?

Apologies if I seem to be a bit dim, all new to me

mickym

ah...hold on i may have some further info.

at the end of my online tax return it says:

Total tax, Class 4 NIC and Student loan due for 2011-12 £380.45

Is there a chance that it isnt Class 4 im being asked to pay for and just 'standard tax'?

Even if it was 'standard tax' I didnt think id have to pay anything as I thought £1899 was too low to pay any tax on?

InsertWittyName

You pay tax on ALL earnings added together (only NI is separated between different employment).

You will pay 20% tax on all your freelance earnings, so the £380 will be for the £1,899 you've earned extra.

20% of 1,899 is £379.80

The few pence of difference is likely due to very slight underpayment in your PAYE job.

mickym

ah! thats that then

Thank you for clearing that up.

However..... when i spoke to 3 different tax advisors they said different and that earnings made with my employer and what i earned by myself would be treated as seperate.

InsertWittyName

mickym wrote: »

However..... when i spoke to 3 different tax advisors they said different and that earnings made with my employer and what i earned by myself would be treated as seperate.

Not for tax purposes.

You may have mis-interpreted what they were saying - if not, avoid those advisors in the future!

mickym

Thank you once again for your help. Really appreciated.