National Insurance
National Insurance for the self-employed
NATIONAL INSURANCE
If you are self-employed an integral part of a self employed tax return or a CIS tax return is that you will normally pay class 2 National Insurance and class 4 National Insurance.
If you are self-employed as an actor, special rules applied until 5 April 2014. Under these special rules, actors paid Class 1 National Insurance, rather than Class 2 and 4 National Insurance, on income from some contracts, even thought there were treated as self-employed for income tax purposes. From 6 April 2014, actors should simply pay class 2 and class 4 National Insurance, as other self-employed workers.Throughout, however a self employed tax return will still have to be completed as per normal as this still defines the nature and amount, if any, of any forthcoming self employed tax rebate.
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Class 2 National Insurance
Once you start self employment you become liable to pay Class 2 National Insurance. The way class 2 National Insurance is paid will change from 6 April 2015.
From the tax year 2015-16, most people will pay class 2 National Insurance along with class 4 National Insurance and income tax (in January self-assessment payments as determined by self employed tax return or CIS tax return and class 4 only on profit. If no profit made but tax deducted at source - no class 4 paid and resulting self employed tax rebate or CIS tax rebate forthcoming). This also means that rules for those with small earnings from self-employment will change. People with profits of less than the Small Profit Threshold (£5,965 for 2015-16), will not have to pay any class 2 National Insurance. They will not need to claim an exemption in advance.
In some case, when compiling a self employed tax return people may wish to voluntarily pay class 2 National Insurance. You may need to consider making a voluntary payment of class 2 National Insurance in advance, even where your profits are over the Small Profit Threshold. This is likely to apply if you want to claim Maternity Allowance. For 2015-16, class 2 National Insurance is due at £2.80 per week.
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National Insurance - 2014-15 and earlier years
Historically, class 2 National Insurance has been paid monthly by direct debit, or by quarterly bill. Class 2 costs £2.75 per week in 2014-15 (£2.70 per week in 2013/14). When you register with HMRC as self-employed, in order to complete a self employed tax return, before April 2015, you will be encouraged to set up a direct debit to pay class 2 National Insurance.
National Insurance is payable based on the level of your business profits. See the Gov.uk website for registering on-line at https://www.gov.uk/register-for-self-assessment#4 or contact the Newly self-employed helpline 0300 200 3504.
There are special rates of Class 2 National Insurance for share fishermen and volunteer development workers. For details see the Share Fishermen and Volunteer Development Workers pages on the HMRC website.
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Do I have to pay Class 2 National Insurance?
Unless your profits from self-employment tax return are below the threshold – the Small Profit Threshold of £5,965 for 2015-16, or the ‘small earnings exception’ level for earlier years (£5,885 for 2014-15;) – you will have to pay Class 2 National Insurance.This does not affect your liability to receive a CIS tax rebate or a self employed tax rebate.
Until April 2015, you should apply in advance to HMRC for exception from paying class 2 using form CF10. From 6 April 2015, your liability to pay will normally be determined on your self employed tax return.
Even when you do not have to pay class 2 National Insurance, you may wish to pay Class 2 anyway in order to preserve your pension entitlement and entitlement to certain other State Benefits. If your profits are over the small earnings exception level / Small Profit Threshold, you must pay Class 2 National Insurance. This will be indicated on a self employed tax return.
Class 4 National Insurance
If your taxable profits are above the lower Class 4 profit limit (£7,965 for 2014-15; £8,060 for 2015-16) you will pay Class 4 contributions of 9% on profits over this limit. You pay Class 4 National Insurance together with your income tax – usually due by 31 January and 31 July each tax year. If profits are high (over £41,865 in 2014-15; £42,385 in 2015-16) then the rate of Class 4 National Insurance falls to 2% on profits over this higher limit.
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Can I reclaim my National Insurance if I have overpaid?
The straight answer is yes you can. HMRC only requires the set amount of National Insurance contributions which are set by your earnings or your profits. Of course, should you 'choose to' you can opt to voluntarily pay more, however you are not obligated. Most often when individuals voluntarily pay more than they need to it is due to them falling behind and playing catch up.
If you want to claim yours back follow the useful link below and simply follow the steps shown.
What if I still find this confusing?
Do not worry. That's the first thing. National Insurance forms a natural part of our service and falls in organically with the self employed tax return service we offer, also the CIS tax return and of course, self employed tax rebate and CIS tax rebate. The above is merely a guide. If you are one of our clients then we will sort all of your National Insurance related matter out for you. All you have to do to register as a client is press one of the 'claim now' links on this page, fill out the very short online form and press send. And that's it! Couldn't be simpler. We will take it from there.
To get started? Simply click CLAIM NOW.
USEFUL LINKS.
GOV UK
HMRC
CURRENT TAX RATES
www.selfemployedtaxback.com
HMRC N.I. RATES