Class 4 NIC due for 2020-21

meatandtwoveg

Can I ask?
As my only income is from capital gains on trading listed shares. Dividends received from listed shares. Do I have to pay Class 4 NIC?

I have no other income at all.

I ask as I am currently filling in my self return for 20/21. I am getting this message at the print calculation page? I don't quite understand it?

I owe in total tax from trading and dividends a total of £1,266.85. But they have added on this number £693.82 regarding Class 4 NIC.

Total message below?

Estimated payment due by 31 January 2022

You must pay the total of any tax and class 4 NIC due for 2020-21 plus first payment on account due for 2021-22 by 31 January 2022

(Note: 2nd payment of £693.83 due 31 July 2022)

This amount does not take into account any 2020-21 payments on account you may have already made

2020-21 balancing payment £1,266.85

1st payment on account for 2021-22 due 31 January 2022 £693.82

Total due by 31 January 2022

£1,960.67

sheramber

What pages on the return did you complete?

meatandtwoveg

sheramber said:

What pages on the return did you complete?

Capital gains, Disposed chargeable assets, UK interest, Dividends.

Dazed_and_C0nfused

Where are you seeing £693.82 is being added for Class 4 NIC?

Have you actually checked the calculation to see how the tax is calculated?

Do you understand how payments on account work?

meatandtwoveg

Dazed_and_C0nfused said:

Where are you seeing £693.82 is being added for Class 4 NIC?

Have you actually checked the calculation to see how the tax is calculated?

Do you understand how payments on account work?

I have been doing some dummy runs, projected returns, i.e. dividends not realized?

It seems if you input a high dividend income, solely from tading shares, not self employed; say for example £30k per annum, the software assumes you are self employed? Its as if if your dividend income is above a certain amount within a given tax year, then Class 4 NIC is added? Even though you are not self employed? Maybe a software glitch.

Jeremy535897

As my only income is from capital gains on trading listed shares. Dividends received from listed shares. Do I have to pay Class 4 NIC?

This statement suggests that you have no understanding of the common terminology used, which may have led to incorrect inputting:

• income cannot be from capital gains on trading shares. Income and capital gains are mutually exclusive
• almost no individual is treated as trading in shares (unless they work in a brokerage, stock exchange etc). They are treated as investors. That means their only income from shares is dividends, and the "trades" they carry out result in capital gains or losses
• you can't have dividend income from trading shares. Dividends arise from the possession of shares

You never pay class 4 NIC on dividends, although the new 1.25% levy will be charged on dividends above £2,000 a year from 2022/23. You could have dividend income of £10 million a year and there would be no class 4 NIC. You pay capital gains tax, not income tax/class 4 NIC on profits you make on selling shares (after the annual exemption is used).

I first wondered whether somehow you are inputting your sales of shares as some sort of trading income, rather than capital gains, but that conflicts with what you have said. I also wondered whether the figure for payments on account on the software you are using simply describes it as "income tax and class 4 NIC" when there is no class 4 NIC charged. But even the payments on account don't make sense as they exceed the balance due for 2020/21. They should be £633.42, and that assumes no capital gains tax.

meatandtwoveg

Jeremy535897 said:

As my only income is from capital gains on trading listed shares. Dividends received from listed shares. Do I have to pay Class 4 NIC?

This statement suggests that you have no understanding of the common terminology used, which may have led to incorrect inputting:

• income cannot be from capital gains on trading shares. Income and capital gains are mutually exclusive
• almost no individual is treated as trading in shares (unless they work in a brokerage, stock exchange etc). They are treated as investors. That means their only income from shares is dividends, and the "trades" they carry out result in capital gains or losses
• you can't have dividend income from trading shares. Dividends arise from the possession of shares

You never pay class 4 NIC on dividends, although the new 1.25% levy will be charged on dividends above £2,000 a year from 2022/23. You could have dividend income of £10 million a year and there would be no class 4 NIC. You pay capital gains tax, not income tax/class 4 NIC on profits you make on selling shares (after the annual exemption is used).

I first wondered whether somehow you are inputting your sales of shares as some sort of trading income, rather than capital gains, but that conflicts with what you have said. I also wondered whether the figure for payments on account on the software you are using simply describes it as "income tax and class 4 NIC" when there is no class 4 NIC charged. But even the payments on account don't make sense as they exceed the balance due for 2020/21. They should be £633.42, and that assumes no capital gains tax.

Thank you very much buddy. Your right, I do not have a clue, my first return ever. I'm starting to think, well wish I had never ever bought a share, and left my cash in NS&I.

I'll keep doing the dummy runs, see if I get anywhere.

Dazed_and_C0nfused

meatandtwoveg said:

sheramber said:

What pages on the return did you complete?

Capital gains, Disposed chargeable assets, UK interest, Dividends.

I cannot see how you have got Class 4 NIC in the actual calculation (not the summary you are referring to) with that combination of pages.

Jeremy535897

Did you put anything in box 17 of SA100?

[Deleted User]

Jeremy535897 said:

Did you put anything in box 17 of SA100?

The calculation at the end always states  - ‘’The amount of income tax and class 4 NIC due is….’ - that does not mean that there is any Class 4 NIC due. That is just the phrase used by HMRC whether Class 4 is payable or not.

This has come up on here a few times.

Of course, it is also possible that the dividends has indeed been entered in the self-employed section.

Jeremy535897

[Deleted User] said:

Jeremy535897 said:

Did you put anything in box 17 of SA100?

The calculation at the end always states  - ‘’The amount of income tax and class 4 NIC due is….’ - that does not mean that there is any Class 4 NIC due. That is just the phrase used by HMRC whether Class 4 is payable or not.

This has come up on here a few times.

Of course, it is also possible that the dividends has indeed been entered in the self-employed section.

That was my speculation a few posts earlier. OP said they didn't complete a self employment section so I doubt it is that.