Class 4 - aged 64/65

[larkim]

THinking ahead to next year's SA return, my father (private music teacher) will turn 65 in the tax year in June.

I presume (correct me if I'm wrong) that class 4 NICs will be payable on his profits until his birthday, but not after that.

Is that correct? And do you know if the HMRCs online filing system will account for this "automatically" by pro-rating the profits, or will he have to claim separately for that one somehow?

Many thanks!

Matt

[robbob]

Hi lark

It would be sensible to make the presumption you have done as employees stop paying NI on their birthday.

However the revenue take the miserly approach and charge class 4 in full on profits in the year you retire.
This is even more unfair for people with a birthday near the 5th April as your father has as the extra amount payable that should not be is higher.
At least the weekly NI self employed stamp will stop on his birthday.

[larkim]

Robbob

Thanks for the quick response.

Are you aware of this being challenged at all? I have no problem with HMRC making arbitrary rules which they are clear and consistent about (and can evidence in their guidance literature), but if they do this out of laziness then they should be challenged.

In the grand scheme of things its not much - he pays about £700 per year in class 4 NICs, so I guess the potential saving should be about £525 - but that's £525 he won't be able to spend as a consumer, or give to me as an inheritance!!

As you say, he's stopped paying the weekly stamp already, which is what prompted me to ask the question as I did his 2007-8 return recently.

Thanks again!

Matt

[taxattack]

Robbob

Thanks for the quick response.

Are you aware of this being challenged at all? I have no problem with HMRC making arbitrary rules which they are clear and consistent about (and can evidence in their guidance literature), but if they do this out of laziness then they should be challenged.

Matt

Hi Matt

For once it's not HMRC to blame - it's the rules (Statutory Instrument 1004 of 2001) made by Parliament.

Chris

[larkim]

Ah well, can't argue with that then. Despite his socialist background, no doubt I'll get plenty of expletives from my father about how outrageous it is!! Its amazing how people start to resent paying tax so much when they see if going out as a cheque rather than via PAYE.

Matt

[taxattack]

Ah well, can't argue with that then. Despite his socialist background, no doubt I'll get plenty of expletives from my father about how outrageous it is!! Its amazing how people start to resent paying tax so much when they see if going out as a cheque rather than via PAYE.

Matt

You'ld better not tell him that, unlike Class 1, the apparent equivalent for employees, as opposed to the self-employed, it confers no benefits at all, which actually come from paying Class 2 (the weekly stamp).

Chris