Is there a constant deduction from you payslip? What is a NIC? Are these taxes?
You pay National Insurance Contributions to build up your entitlement to certain state benefits, including the State Pension (Pension Credit) or other benefits, such as statutory sick pay, employment allowance, or others. You start paying NICs when you turn 16 years old and stop when you reach State Pension age.
The contributions you pay depend on how much you earn and whether you're employed or self-employed. As a self-employed person, you can ask for deferment when cash-flow is too tight, then make higher payments when able.
There is a range of rates payable, but as a self-employed business owner, the two most important NICs to be aware of are Class 2 and Class 4.
- Class 2 has to be paid always (£2.70 per week). However, if your earnings are below £5,725 per year (2013-14) you might not need to pay. Class 2 Deferment application forms can be found on the HMRC website here.
- Class 4 is a percentage of income (9%) and is calculated together with the tax return. You are liable from the start of the tax year after the one in which you reach State Pension age.
National Insurance contributions (NICS) are another key aspect of payroll management and earnings, whether employer or employee.
Some people also choose to pay voluntary National Insurance contributions, where for instance you: aren't working and are not claiming state benefits, haven't paid enough National Insurance contributions in a year to count for the State Pension or other long term state benefits or you live abroad and want to maintain your state benefits entitlement
For an overview of all of the rates payable, see the HMRC table here
For instance, state Pension age is consistently under review, given pressures on government budgets, but at the time of writing, it is 65 for men born before 6 December 1953 and 60 for women born before 6 April 1950. State Pension age for women born on or after 6 April 1950 is gradually increasing and will reach 65 in November 2018. From December 2018, State Pension age for women and men will gradually increase from 65 and reach 66 by October 2020.
Other Keywords: wages; paid; source; income; deducted