I have a new client, a hair dresser, who has been employed April 2011- November 11. She then had to go self employed from December 2011 to March 2012. During the time that she was employed, her employer deducted PAYE and NIC. How do I calculate the NIC's for her time self employed. Do I work out the total NIC liability on her profits and then deduct what has already been paid as I would with the tax? Or do I work out the self employed NIC's separately?
Hi Clare. Yes the Class 4 liability is worked out separately. This class kicks in at profits over £7,225 which she might not have reached being only self employed for a few months.
There are also Class 2 contributions to think about, but again, you may apply for Exception from this class if profits are below £5,315. I have always found them amenable to late applications for this exception.
So just to be sure then. I've calculated her profits from self employment as £10,044, I then deduct £7,225, which leaves me with £2,819. So the Class 4 contribution would be 9% of £2,819?
By the way, she has notified HMRC and has been paying Class 2 NIC since she became self employed.
Yes thats right = approx £253. Class 4 has an annual zero band (rather like income tax) whereas class 1 employment NIC is weekly.
Pretty good profits for 3 months trading and glad she's registered. One never knows when by just answering a question, there might be an even worse trip-wire lurking underneath. We're a friendly bunch here, so feel free to ask away and leave an introduction if you wish as this can help to tailor answers.
