Tax NI Question

[Graham]

A mate of mine has this current quandry he was self employed then became a director of a co on paye. things havent taken off quite with that co, so hes been paid via paye but under the ni threashold. his tax allowances have been used on his paye.

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at some point a while back when XXX Ltd was my main income I stopped paying class 2 NI contributions, as I thought you were either employed or self-employed, and the NI closed my self-employed account.

all my income has been declared, employed and self-employed and I have made class four NI contributions via self assessment, but not sure if they took class2 or even if they would have done? - trying to find a statement from them that clarifies that.

my question is should I have continued paying class 2 contributions?

(class1 is what you pay via Xxxx ltd on my behalf, class 2 is £2 a week, and class 4 is a percentage of profits, but I thought there were limits...)


my next question is, if I should have continued paying class 2 contributions, how do I get back on the right side of the law without a problem?

<<<<<<


anyone?

[thewave]

Class 2 National Insurance contributions are made by self employed persons, they are not payable by an employee. You state that tax allowances have been used up via PAYE, assuming your tax code is 503L for the tax year to 5/4/07, then that being paid at £97 per week would give you entitlement to contribution based benefits.

Class 4 National Insurance is a tax.

Best thing to do is contact the national insurance office and confirm you have a contribution record for the year in question. If not, voluntary contributions may be required, which for 2007 was £7.55 per week.

[Graham]

so far in 2007 he's only been paid 1500 quid on paye, so no actual payments as under threasholds for tax and NI. He's had more than that as self employed freelance. He is due some payment which will take him over the ni threashold ( when the company gets paid) so will pay come NI as an emplyee this year

I guess his real question is when he talks to the NI peeps with they simply say pay x or will they stiff him with a fine as well !!!

G

[thewave]

Graham said:

so far in 2007 he's only been paid 1500 quid on paye, so no actual payments as under threasholds for tax and NI. He's had more than that as self employed freelance. He is due some payment which will take him over the ni threashold ( when the company gets paid) so will pay come NI as an emplyee this year

I guess his real question is when he talks to the NI peeps with they simply say pay x or will they stiff him with a fine as well !!!

G

Sorry, I thought he was not operating as self employed any more. In that case, if he's earning through self employment, more than the small earnings exemption threshold of £4,635 he should be paying class 2 contributions at the flat rate of £2.20 per week. There will be no fine or interest, he will just need to bring his record up to date.

[Graham]

Cheers Thanks or that i'll pass it on.


PH scores again...

G

edited to say.


Ok so does it work in the same way as if he had 2 paye jobs i.e you get the ni threashold in both before you pay anything.

and if he has a paye job and freelace as soon as the paye goes over £4,635 he needs to start making the 2.20 per week payments again reguardless of what he's paying on paye?

Ta

Edited by Graham on Wednesday 10th October 16:17

[Eric Mc]

NI works in a different way to tax. NI is charged on each of your earned income sources individual;ly - not on your combined earned income from all sources.

Therefore, if you have (say) three PAYE jobs AND a Self Employed activity, you look at the Gross Income levels from each individual activity and then decide whether NI is doe on each one.

If your Self Employed income remained above the thresholds then you still should have continued paying Class 2 and Class 4 NI - even if you had a separate PAYE job. It doesn't matter whether NI was or wasn't due on the PAYE income.