National Insurance Contributions - can you opt-out?

Discussion in 'Accounts & Finance' started by samsutton, Dec 15, 2008.

  1. samsutton

    samsutton UKBF Regular Free Member

    Posts: 33 Likes: 13
    Hello,

    I was wondering if you can opt-out of NIC?

    I've read on direct.gov.uk that if you're self employed you will have to pay 1% on any taxable profit over £43,875 (2009/10) - does that mean pre tax profit?

    All help appreciated.
    Posted: Dec 15, 2008 By: samsutton Member since: Oct 21, 2008
    #1
  2. David Griffiths

    David Griffiths UKBF Regular Moderator

    Posts: 10,270 Likes: 3,261
    No chance!

    Actually I think that it may be possible for foreign nationals, but I'm not sure about that.

    There are various classes of NIC, and there is an overall maximum that is payable in terms of the basic contribution. If you are already paying the maximum weekly amount as an employee (Class 1) then you can apply for Class 2 and Class 4 (relating to self employment) to be deferred.

    Class 2 is a flat rate weekly contribution, and you can apply for exception if your self employed earnings are less than £4,825. Class 4 is chargeable at 8% on profits between £5,435 and £40,040, and 1% above that. Your figure of £43,875 is next year's upper limit.

    Profits for Class 4 NIC are the same as for income tax, so yes, pre-tax profits
    Posted: Dec 15, 2008 By: David Griffiths Member since: Jun 21, 2008
    #2
  3. Martin P

    Martin P UKBF Regular Free Member

    Posts: 343 Likes: 80
    As a self employed (sole trader) you will need to pay
    Class 2 Which is £2.30 a week

    AND
    Class 4 Which is 8% on profits between £5435 and £40040, And 1% on any profit over that

    (The rates may change for 2009 2010; Havn't checked!)
    Last edited: Dec 15, 2008
    Posted: Dec 15, 2008 By: Martin P Member since: Nov 20, 2008
    #3
  4. samsutton

    samsutton UKBF Regular Free Member

    Posts: 33 Likes: 13
    So in effect any company director making decent profits in 2009/10 will have to pay a minimum of £124.80 per year (£2.40 per week) plus 8% of £40,040 which equals £3,203.20 plus 1% of anything above that.

    Scandalous.
    Posted: Dec 15, 2008 By: samsutton Member since: Oct 21, 2008
    #4
  5. Martin P

    Martin P UKBF Regular Free Member

    Posts: 343 Likes: 80
    If you are a director of a Limited company it is different

    There are quite a few topics on this if you search, with all of the amounts, I don't know them off hand ;)
    Last edited: Dec 15, 2008
    Posted: Dec 15, 2008 By: Martin P Member since: Nov 20, 2008
    #5
  6. Chippie

    Chippie UKBF Regular Full Member

    Posts: 807 Likes: 140
    Personally I just look upon NI as an additional income tax, which is what the mouth breathers in the Exchequer would call it if they had the balls. :cool:
    Posted: Dec 15, 2008 By: Chippie Member since: Jan 3, 2008
    #6
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  7. MyAccountantOnline

    MyAccountantOnline UKBF Regular Full Member

    Posts: 9,684 Likes: 1,898

    No - self employed people pay class 2 and class 4 NI ie the weekly £2.40 and % of profits. A company director is an employee and pays class 1 NI.

    The NI saving can be one of the advantages of trading as a limited company - a limited company doesnt pay NI on its profits.
    Posted: Dec 15, 2008 By: MyAccountantOnline Member since: Sep 24, 2008
    #7
  8. MyAccountantOnline

    MyAccountantOnline UKBF Regular Full Member

    Posts: 9,684 Likes: 1,898
    Posted: Dec 15, 2008 By: MyAccountantOnline Member since: Sep 24, 2008
    #8
  9. samsutton

    samsutton UKBF Regular Free Member

    Posts: 33 Likes: 13
    Confused.com

    Will be calling accountants in morning.
    Posted: Dec 15, 2008 By: samsutton Member since: Oct 21, 2008
    #9
  10. Jenni384

    Jenni384 UKBF Regular Full Member

    Posts: 4,812 Likes: 1,528
    Good idea :)

    In a nutshell:

    Self employed people pay Class 2 and 4 NI as above.

    Directors of Limited Companies are not self employed (even though they typically still work for themselveS) and pay Class 1 (or not, which is where accountants come in ;) )

    Typically you still get credited with, but do not pay, National Insurance as a company director, but it all depends on your personal circumstances.

    And yes, NI is just another tax.
    Posted: Dec 16, 2008 By: Jenni384 Member since: Oct 1, 2007
    #10