The self employed
NICs are due from the self-employed as follows:
- Flat rate contribution (Class 2)
- Amount based on the taxable profits of the business (Class 4)
Class 2 NIC used to be collected by direct debit. But from 6 April 2015, the liability to pay Class 2 NIC arises at the end of each year, and is collected as part of the final self assessment payment.
The amount of Class 2 NIC due is calculated based on the number of weeks of self-employment in the year. The rate of Class 2 NIC is £2.80 per week for 2015/16 and 2016/17. Class 2 NIC will be paid alongside the income tax and Class 4 NIC.
For those with profits below a threshold (£5,965 in 2016/17) no longer have to apply in advance for an exemption from paying Class 2 NIC. If they want to protect their benefit rights, they have the option to pay Class 2 NIC voluntarily at the end of the year.
From April 2018, the government will abolish Class 2 NIC.
For tax year 2015/16, Class 4 is payable at 9% on profits between £8,060 and £42,385 (in 2016/17 between £8,060 and £43,000). Additionally, there is a further 2% on profits above £42,385 (in 2016/17 above £43,000).
Voluntary contributions
Flat rate voluntary contributions are payable under Class 3 of £14.10 per week for tax years 2015/16 and 2016/17. These contributions give an entitlement to basic retirement pension. If someone is not liable for other contributions, may pay Class 3 in order to maintain a full NICs record.
The Class 3A Voluntary National Insurance
For the people who reach State Pension age before 6 April 2016, a new class of voluntary NIC (Class 3A) has been introduced. This gives an opportunity to boost their Additional State Pension by topping it up by up to £25 per week.
The amount of the contribution depends on the age and sex of the individual. Please clink on the following link to find a useful calculator to determine the cost of contributions to be made. www.gov.uk/state-pension-topup
Class 3A NIC can be made from 12 October 2015 up to 5 April 2017.
If you are self employed and need help with NICs, please contact us at Adiva Accountants London for further advice.