Will I have to pay class 4 NI

[bsliddar]

My employed salary is 35K. I pay NI and PAYE tax on this as per usual. I also earn about 35K self employed income per annum. I pay class 2 NI by direct debit each month. Will I be liable to pay class 4 NI too? If so, how can I work out how much I need to pay? Is it the 8% that read in the national insurance section?

Thanks
Bal Liddar

[jpcentral]

Class 4 is calculated as 8% on profits between £4,895 and £32,760 then 1% on profits above £32,760.

John Perry
Central Business Services
Loughborough
www.centralbusiness.co.uk

[Lambs]

B,

If you are making a Self Assessment Return, (which is presumably the case if you are self-employed), then you will have to calculate your liability to Class IV NIC thereon.

The starting point is to calculate your Class IV liability according to what's on your return, aggregating all sources subject to Class IV NIC.

As a very basic rule, you can offset your Class I primary contributions paid in a tax year, against your Class IV liability at the main rate. However, you cannot do this on your return: you must instead apply to the National Insurance Contributions Office, advising that you think that you may have overpaid NIC overall, for the tax year in question. In theory, they should contact you to advise you that they think you've overpaid, but it's as well to get the ball rolling yourself.

If you have already applied for the deferment of Class II/IV National Insurance Contributions, then you could avoid having to pay the Class IV through your SA return and instead account for any such liability directly to the National Insurance Contributions Office. This would have cashflow benefits: not only would you not overpay in the first place, but you would remove your Class IV liability from the SA regime and corresponding effect on payments on account.

That might be something to bear in mind for the future.

Regards,

Lambs.

[Lambs]

Sorry, just to clarify, read this as the antepenultimate paragraph:

"With regard to your Self Assessment Return, and the corresponding liability, you must calculate your Class IV liability thereon without considering the Class I Primaries you will have made in employment: this effectively means you may have to pay excessive contributions. Any claim to a refund must be undertaken as a separate exercise."

Regards,

Lambs