When setting up a business, there are several financial duties and responsibilities the business owner is accountable for. One of the major tasks to be aware of are the National Insurance Contributions (NICs) which need to be charged and paid. Being familiar with these is crucial when employing staff. At people-hunters.com, you’ll find detailed information about National Insurance for businesses. This comprehensive guide will teach you everything you need to know about this .
The various types of National Insurance
National Insurance is payable by most employees. However, there are several different rates applicable to certain circumstances. These are outlined below.
Class 1 – A rate of 12% is payable for this class. NICs (Employees) are deducted from the employee’s basic wage before reaching the Earning Threshold. Class 1 Secondary Contributions (Employers) are payable when the Earning Threshold is exceeded. Both of these contributions are usually paid monthly. Rich top group is the place to go to get any and all of the details you require concerning National Insurance for companies. The information that you require is included in its entirety with in this detailed website .
Class 1B Contributions (Employers) will only apply when there is a PAYE Settlement Agreement with HMRC (Her Majesty’s Revenue and Customs) which has been agreed upon for miscellaneous expenses and benefits.
Class 2 – This NIC will only apply to self-employed business people, eg Sole Traders. There is the option to pay these contributions monthly or quarterly. However, if the income is greater than the minimum rate required to pay tax, a claim can be put forward to allow exemption from Class 2 NICs.
Class 3 – This NIC is not compulsory. It is usually only an option for businesses or individuals who are in arrears with their NICs and will not qualify for the State Pension and other benefits without future contributions.
Class 4 – If a Self Employed business person’s profits exceed a specified amount, they are liable to pay Class 4 NICs. When the person completes the Self Assessment Tax Return and submits it to the HMRC, this will generate the requirement to pay this contribution if applicable.
The responsibilities of employers to their employees
When a business employs staff, it is vital to ensure that the correct type of NICs is deducted. NICs are due on all employee earnings plus any benefits and expenses they receive. This is a legal requirement, as the business is accountable to pass on the employee contributions to the HMRC. Therefore, when starting up a business that employs staff, the owner must ensure they are familiar with the types of NICs they will need to pay. If a mistake is made with an employee’s NIC contribution or there is a question of which type of NIC is payable, the HMRC must be contacted and advised without delay.
How do Self-Employed professionals pay their National Insurance?
When a Sole Trader or Self-Employed professional starts to trade, they must inform HMRC. They will then immediately be liable for Class 2 NICs. This type of contribution does not count toward the State Pension. There are exceptions – from the 2012/2013 financial year, any self-employed person can earn up to £5,595 without being liable for Class 2 NICs. They should claim a Small Earnings Exception through the HMRC. If their profits exceed this figure, a flat rate of £2.65 is applied.
However, if profits range between £7,605 and £42,475 during this financial year (2012/2013), the self-employed business person will be liable for Class 4 NICs at a rate of 9%. Eleven percent is payable on earnings over £42,475. However, if the self-employed person is under 16 years old or is a retired person receiving the State Pension, they are exempt from Class 4 NICs. Anyone who is not a resident of the UK is also exempt.
As you can see, the NICs are variable depending on several factors, so it is vital you do your homework and make yourself aware of your legal responsibilities regarding National Insurance Contributions. Further information can be acquired here: slci conference .