NI and being Self Employed and Employed

sorcerer

Hi All,


I hope somebody can help, I am currently employed on PAYE, but soon I will starting a self employed business, but I will continue to work and earn PAYE as normal. Because the self employed I know I will have 20% tax to pay on the full amount. However I am little confused about national insurance. Will I have to pay this, and at what level, level 4 contributions only mention earnings greater than about £7000 which I will never reach from self employment. And level 2 seems very low at a couple of pounds a week.


I have never been self employed before so it's all a bit new to me. I off course already pay NI on PAYE.

CLAPTON

you need to pay both class 2 and class 4 NI contributions

class 4 are paid on SE earning of over 7748

if your earning are low you can apply for class 2 exemption .. I can't remember the figure but put 'small earnings exemption ' into a search engine

sorcerer

ok that's great so I think because earning will be about £5000 a year, I guess I will pay Class 2.


Just another question, if I was to have somebody working for me as self employed and I paid them a wage out of my earnings, can this be done.


For example I earn £5000 a year in my business, I then pay somebody else £5000 a year as a wage, so my business has now made £0 profit. Would I need to pay NI on this.

zygurat789

sorcerer wrote: »

ok that's great so I think because earning will be about £5000 a year, I guess I will pay Class 2.


Just another question, if I was to have somebody working for me as self employed and I paid them a wage out of my earnings, can this be done.


For example I earn £5000 a year in my business, I then pay somebody else £5000 a year as a wage, so my business has now made £0 profit. Would I need to pay NI on this.

The limit is £5725 up to April 2014 and £5885 afterwards.
If someone was working for you and being paid wages they would not be self employed by definition.

tiger_eyes

It amazes me the lengths people will go to just to avoid paying £2.70 a week in national insurance.

sorcerer

I am not trying to avoid paying anything my sister does all of the work, I just collect the money, which is why I want to give her all of the money, but if I have to pay the 20% tax and NI, I will have to take it out of her pay. But she is not a tax payer, she doesn't earn enough.


I realise it complex, but she was self employed with a company for various personal reason she can no longer go and pick up her wages or do all of the things expected of her. So I have said I will sign up. But I don't really want to take 20% Tax + NI from it because its not fair on her, because she is actually doing the work.



So she chooses what work she wants to do and how much, she doesn't get paid for damaged work, and has to fix those free of charge. I am then paid the money which I want to pass to her.


I have already warned her, that it's likely HMRC won't allow this and I will have to pay the tax and NI.

Hope that make some sort of sense :-)

dktreesea

It makes sense to pay the NI class 2, because it counts towards your years for your state pension. If you plan on claiming the pension credit, i.e. still being poor by the time 65 comes around, then ignore this. But if you plan to claim the normal state pension, i.e. be wealthy assets wise by then and ready to retire, then the class 2 NI will be the best investment you'll ever make.

sorcerer

I am already employed and will continue to be, so I also pay Class 1, so I don't think it will make any difference if I pay class 2 also. The £2.70 is a very small fraction of what I pay at class 1.