Tax Return Breakdown... (UK)?

Question

Part of the breakdown of my husbands Annual Tax Return bill is over £900 for Class 4 National Insurance...

Is this NI usually paid by the person you are working for during that tax year, or is it up to the individual self employed person to pay it?? We never knew this money was included in the tax bill before, it's only because we have some problems with the bill that we have seen this NI contribution...

Is it usually just deducted before the rebate figure is worked out, so that's why we never see or know about it??

Answer 1

If he is self-employed, there is no liability on the "employer", as strictly he doesn't have one.

Self-employed people pay a fixed rate Class 2 NI contribution, but to try to give parity with employed people who pay an amount of NIC (Class 1) in accordance with earnings levels, the self-employed have to also pay Class 4, which is also based on income levels.

NIC Class 4 is calculated on income received. Tax underpayment or overpayment has no bearing on it.

Answer 2

Self-employed people must make class 2 & class 4 NIC payments themselves. It will never be the responsibility of the person they are completing a contract for unless you get into the issue of deemed employment.

Class 2 is about £2-£3 a week and it collected through direct debit.

Class 4 is 8% of profits between £5,435 and £36,000 and 1% on profits over £36,000. These are payable in installments with income tax on 31 Jan and 31 July during and just after the tax year to which they relate. Interest accumulates on late payments.

NIC is separate to income tax, thus if you get an income tax rebate it will not affect NIC.

Answer 3

Just a further point:

Class 4 national insurance does not go towards future state benefits!

Answer 4

If your husband is self-employed he has to pay class 4 contributiond himself.  It's really important as well as he has to be up-to-date in case he is ever ill and needs to claim sickness benefit and it will also affect his pension when he reaches 65 if he isn't up-to-date with contributions.  I'm sure you can pay weekly through direct debit. You may be able to reach an agreement where you pay off the arrears.  Don't leave it though.