This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

National Insuracnce Contributions After Incorporation

Posts: 1
Joined: Wed Aug 06, 2008 3:15 pm

Postby G.M » Thu Dec 09, 2004 6:23 am

I am looking into the tax differences between soletraders and limited companies.

I understand that as a self-employed soletrader and an employer, I may be liable to making class 1 secondary, class 1a, class 2 and class 4 NICs.

However, I also understand that if I were to incorporate, I would no longer be self-employed or an employer, but an employee of the company (as a director).

Would this therefore mean, that after incorporation, I am no longer liable for class 1 secondary, class 1a, 2, and 4 NICs.

Or would I still have to make these contributions as a director 'on behalf' of the company.

(or am I completley mistaken about everything.)

Any help would be very much appreciated.
Thank you very much.
I shall look forward to replies.

Posts: 1418
Joined: Wed Aug 06, 2008 3:15 pm

Postby Lambs » Sun Dec 12, 2004 5:30 pm

Well done for spotting all the main NI charges! I think that you have pretty much worked it out:

If you incorporate you will probably be both shareholder in, and director of, your new company. The latter also means that you will be an employee of same. You will no longer be liable to Class II or IV contributions, but you will still be 'wearing your employer's hat,' as you did when self-employed and employing staff, so you, as the employer, will still have to contend with Class I and IA contributions, 'though you will personally only be liable to Class I primaries.

You should of course discuss this matter of incorporation with your accountant/tax adviser, as there is an awful lot more to it than just tax or NI.

Return to “PAYE and Payroll Taxes, National Insurance, NICs”