National Insurance For The New Tax Year: April 2021-2022
Thursday March 11, 2021
There are various classes of National Insurance, for which the main ones are explained below;
If you are an employee:
- National Insurance is deducted at a rate of 12% on all earnings
- Between £184 and £967 per week
- This equates to between £797 and £4189 per month, or
- Between £9,568 and £50,270 a year.
- If you are an employee that earns more than £50,270 per year, then earnings above this amount will be subject to deductions of 2%.
If you are an employer:
- You will need to pay 13.8% on earnings over £170 per week
- Employers do not have to pay the first £4000 of employer NIC
- Employers can make a claim if they are a business or charity paying employer’s Class 1 National Insurance
- Employers can also claim if you employ a care or support worker
If you are a Director:
- As a Director you can choose depending on your circumstances whether to pay National Insurance. Here at RIFT Accounting we contact all our clients to ensure they are receiving the correct amounts. The options for the 2021/2022 tax year are as follows;
- Option 1 – you take an annual salary of £8,840 and will not have any National Insurance deductions made.
- Option 2 – you take an annual salary of £12,570 and will have employee National Insurance deductions of £360 deducted and employer National Insurance Contributions of £515 per year. If you are eligible for employment allowance, as explained above, the employer National Insurance will not need to be paid provided the amount does not exceed £4,000. Liabilities for Directors are payable from January to March of each tax year (please note, if you have employees their deductions for National Insurance are made in equal amounts throughout the year).
However, you do need to consider that if you are the only director employee, then you cannot claim the employment allowance and will have to pay all the employer National Insurance Contributions.
There are 2 further considerations for Class 1 National Insurance, which are explained below;
- Class 1A – Employers pay this on work benefits provided to employees 13.8%
If you are self employed:
- You do not pay National Insurance for the first £6,515 per year, known as the Small Profits threshold, the charge for class 2 is a flat £3.05 per week
You can make Voluntary contributions to National Insurance, for instance, if you have had a gap in earnings.
For self employed earnings, you pay National Insurance on profits over £9,568 at 9%, dropping to 2% for earnings over £50,270
At RIFT Accounting we appreciate that this can all appear complex and it is our job to make this as easy to understand as possible, therefore if you have any questions, please feel free to ask and we will be happy to help.
The thresholds change each tax year and these rates will apply from 06.04.2021.