Class 1, 2 and 4 National Insurance

[996c2]

I am both employed and self-employed so need to pay all the above national insurance classes. I am trying to do the tax self assessment for this but am concerned that I may be paying too much NI.

Can anyone explain how it all works and how to avoid overpaying?

Thanks.

[Eric Mc]

Class 2 is independent of Self Assessment. It is paid monthly, usually by DD (or quarterly by cheque).
If you annual taxable net profit (after Capital Allowance claims) is less than £5,075 (2010/11) you can claim "Exception" from having to pay Class 2.

Class 4 IS part of the overall Self Assessment liability and is calculated (for 2010/11) at 8% on all taxable net profits (after Capital Allowance claims) of £5,715.

If your annual NI able salary exceeds £43,875 you can also defer Class 2 and Clas 4 NI on the basis that you have reached maximum earned income for NI purposes.

The thresholds and rates for 2011/12 are different.,

[996c2]

Eric Mc said:

Class 2 is independent of Self Assessment. It is paid monthly, usually by DD (or quarterly by cheque).
If you annual taxable net profit (after Capital Allowance claims) is less than £5,075 (2010/11) you can claim "Exception" from having to pay Class 2.

Class 4 IS part of the overall Self Assessment liability and is calculated (for 2010/11) at 8% on all taxable net profits (after Capital Allowance claims) of £5,715.

If your annual NI able salary exceeds £43,875 you can also defer Class 2 and Clas 4 NI on the basis that you have reached maximum earned income for NI purposes.

The thresholds and rates for 2011/12 are different.,

Thanks Eric for the comprehensive answer.

My salary is above the £44k threshold so I guess I should defer the class 4 and class 2 NI payments.

How can I calculate how much/little Class 4 and Class 2 NI I should be paying?

Thanks

[Eric Mc]

All I can say is use the HMRC tables - or get an accountant

[996c2]

Eric Mc said:

All I can say is use the HMRC tables - or get an accountant

Fair enough, even accountants have to eat :-)

I'll see what I can find out at the HMRC and post it back on here for others in the future.

Cheers.

E.T.A.

I have checked out the HMRC website and have now realised that I need to complete a "CA72B" form so that I can defer my Class 4 (and maybe Class 2 as well) National Insurance payment. This will prevent me from overpaying my NIC as I have two jobs, one as an employee and one self-employed.

Hope that helps anyone with similar problem.

Edited by 996c2 on Saturday 30th April 22:39

[Eric Mc]

NI is collected on a job by job basis. So, you could be over the threshold in one job and have to pay it based on those earnings but a second job (or source of earned income - self-employment included) may be below the yhrshold and yuou may not need to pay any NI based on that source of inocme.