Budget 2016 – National Insurance

National Insurance – Self Employed

Class 2 NIC

The self employed were also provided with some good news in that class 2 national insurance contributions will be abolished from April 2018, saving each self employed individual around £150 per year.  Class 4 national insurance payable by self employed individuals will also be reformed so that self-employed individuals continue to build entitlement to the State Pension and other contributory benefits.

Class 4 NIC

Class 4 National Insurance at the rate of 9% will be payable on self-employed profits between £8,060 and £43,000.  The rate will be 2% for profits of above £43,000.

Class 1 NIC – Employed earnings

Employees will pay class 1 National Insurance at 12% on income above £155 per week, and 2% on income of above £827 per week.

Employers will pay 13.8% of secondary class 1 National Insurance on all employment income paid to employees in excess of £155 per week.

 

Salary sacrifice

One area the Government is looking to tighten up is the range of employment benefits that attract tax and NIC advantages through salary sacrifice arrangements.  They have confirmed that the provision of pension contributions, childcare and health related benefits such as the cycle to work scheme will continue to benefit from these tax and NIC advantages.  However these advantages may be limited on some/all other employment benefits in the future.

 

Termination payments

Certain forms of termination payments are exempt from employee and employer National Insurance Contributions and the first £30,000 is exempt from income tax. The rules are complex and remuneration packages can be structured to minimise the Income Tax and National Insurance that is due on payments that are ordinarily taxable, such as notice and bonuses.

From April 2018, the government will tighten the scope of the £30,000 exemption to prevent manipulation and align the rules so that employer National Insurance Contributions are due on those payments above £30,000 that are already subject to income tax. However, the first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs.

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Nov 25

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Dodd & Co have been our company accountants for around 18 years. Our principal contact is Alan McViety a Partner with Dodd & Co. I believe in robust financial management for our business therefore Alan and I have worked very closely throughout that time, meeting at least monthly producing MMI and developing forecasts and forward projections. Alan has always been very professional, responsive and understands our business very well allowing him to engage in meaningful discussion and provide considered advice. We use Dodd & Co for all financial matters and this regularly includes VAT and Tax Planning specialist advice which we receive from Faye Armstrong (VAT Partner) and Dean Johnston (Tax Partner) working alongside Alan, Faye and Dean are really good to work with, again they ensure they understand the particular matters and objectives clearly from the outset ensuring they can deliver the right solution or options which are always substantive and clear. I believe business is all about relationships and on personal experience can highly recommend Dodd & Co to be really nice people, highly professional, very responsive, they afford great care to their clients and take pride in their work and the advice & services they provide.
-- Martyn Boak, Northern Developments (Cumbria) Limited