Deferment of Class 2 / 4 NI contributions?

swanny65

I wonder if someone would be good enough to explain what i need do to make my dealings with HMRC as simple as possible for 2007/8.

I am an employee paying Class1 NI conts. I have been S/E since November 2006 and have a small earnings exception which ends 05/04/08.Since January 2008 my S/E income has increased 4 or 5 fold as one of the agencies i work for won a national contract.

I received my SEE renewal yesterday which prompted me to provisionally work out my likely profit for 2007/8. It came in at around £5500.00.

Questions:
1. Do I tell HMRC now that i am liable to pay class 2 contributions for 2007/8 and beyond?
2. My Class 1 income for 2007/8 will be about £32000.00, will deferment apply?
3. I understand the Class 2 / 4 deferment level is £34840.00 for 2007/8. Can someone explain how my £37500.00 income will be assessed for NI.
4. I also did local election work for my council of about £800.00 gross. No NI was paid on this income as it was below the LEL for the applicable pay periods. Does this need to be included in point 3 above?
5. I am only interested in the easiest way to sort out my 2007/8 finances as i understand the 2008/9 deferment level is over £40000.00 and I doubt my income will be as high next year - likely to be £30000.00 + £7000.00.

Many thanks

swanny65

Bump.......

Doh

I am also in a identical position as you(33k PAYE and 8k Self employed -previously £31k PAYE and 3.5k SE), i've been meaning to speak to the tax office myself as i couldn't quite figure it out either!

let us know how you get on

swanny65

I will try and call them next week and post what they tell me.

talkinpeace

Questions:
1. Do I tell HMRC now that i am liable to pay class 2 contributions for 2007/8 and beyond? YES
2. My Class 1 income for 2007/8 will be about £32000.00, will deferment apply? No, class 1 applies only to your PAYE and class 2 and 4 are unaffected by class 1 unless you are on mega money any paying at the upper limit which is now very high.
3. I understand the Class 2 / 4 deferment level is £34840.00 for 2007/8. Can someone explain how my £37500.00 income will be assessed for NI. Class 2 is a flat rate not connected to earnings, charged as soon as your profits are more than the personal allowance. Class 4 is basically extra tax, at 8% on all your profits over the PA - no deferrment applies.
4. I also did local election work for my council of about £800.00 gross. No NI was paid on this income as it was below the LEL for the applicable pay periods. Does this need to be included in point 3 above? Each of your employments goes on a separate set of pages on your return. NI is calculated on the weekly wages in that employment. It does not cross reference. Class 1 NI does not go on the SA form.
5. I am only interested in the easiest way to sort out my 2007/8 finances as i understand the 2008/9 deferment level is over £40000.00 and I doubt my income will be as high next year - likely to be £30000.00 + £7000.00. Not sure what you mean by deferrment. But you will be bumping up against 40% tax.....

swanny65

Hi

Spoke to a very helpful lady at HMRC NI deferment section. This is what happens.

I have to pay class 2 NI for 2007/8 as my class 1 NI will be below the upper earnings limit.

I can apply for class 4 deferment now, and it will be granted, as my class 1 and class 2 income combined is over the upper earnings limit.

Then 18 months after the end of the 2007/8 tax year they will contact me and tell me what class 4 has been underpaid and what class 2 has been overpaid.

Regards