This section is available from the data input tab within the tax return and is used to make adjustments to Class 2 and Class 4 National Insurance Contributions. From 2016 HMRC will be collecting both Class 2 and Class 4 NIC through Self Assessment.
Non-residents and those over state pension age are exempt from paying Class 4 NIC. If the taxpayer is exempt from paying Class 4 NIC because of their age, and their date of birth and gender have been correctly entered, then there is no need to complete this section; Taxfiler will recognise that the taxpayer is exempt and ensure that the Tax Return and computation are correct. Full details on Exceptions from paying Class 2 and/or class 4 NIC can be found here.
If the taxpayer is self-employed and is not exempt then Class 2 and Class 4 will be calculated automatically based on the profits for the year. If profits are below the Small Profits Threshold for Class 2 Contributions (current rates) then you can use this screen to indicate that the taxpayer wishes to make voluntary Class 2 contributions.
Taxfiler performs the calculation of the correct Class 2 and Class 4 NIC due for a tax year as provided by HMRC. Where a taxpayer has paid Class 1 National insurance on employment income an adjustment will be made where appropriate, to the Class 4 contributions due. This is called the Regulation 100 calculation. Full details on this calculation are contained in HMRC National Insurance Manual
There are a number of forms in which this information can be included: Self-employment (full: SA103F, short: SA103S); Partnership (full: SA104F, short: SA104S) and the Lloyd’s Underwriter form (SA103L). HMRC require that the information be provided only once; Taxfiler will include the information on the first relevant form of the Tax Return.
Class 2 & Class 4 NICs
- ‘Tick if excepted from paying Class 4 NICs‘ Tick the box if the client is excepted from paying Class 4 NIC for any reason.
- (following fields added from 2022 tax year) Reason for exemption’ – this drop down list of exemption codes will appear after the ‘Tick if excepted from paying Class 4 NICs‘ is ticked. Select the reason. Taxfiler will automatically set the exemption when this data entry screen is first created providing all the information such as date of birth and residence status ios known. It will not select the appropriate code if information that may affect exemption is added afterwards. The following codes will be selected by Taxfiler as follows:
- ‘Under 16’ – where age of taxpayer not yet reached the age of 16.
- ‘Over state pension age’ – the age of the taxpayer is over 65 at the beginning of the year.
- ‘non-resident’ – where the individual is non-resident for the tax year. This code will also be selected if either of the age related codes would apply.
- The box will be non-editable. To amend the code selected by Taxfiler untick the ‘Tick if excepted from paying Class 4 NICs‘ checkbox and then tick it again.
This section allows you to make an adjustment to trading profits for NIC purposes.
- ‘Net trading profits for the year’ This field displays the net trading profits for the year based on self-employment and partnership income entered.
- ‘Adjustment to profit chargeable to Class 4 NICs’ Enter any adjustment to reduce the profits chargeable to NICs
- ‘Profits on which Class 2 and Class 4 NIC is due’ This field displays the trading profits after adjustment. This figure is used to determine whether Class 2 and Class 4 NICs are payable.
Class 2 National Insurance
- ‘Small profits threshold for current year‘ This field displays the Small Profits Threshold amount for the year. Taxfiler will determine whether Class 2 contributions are required.
- ‘Choosing to pay voluntary Class 2 NICs?’ If Class 2 contributions are not required but the client has chosen to make voluntary contributions, tick this box.
- ‘Are you a share fisherman?’ There is a higher rate of Class 2 for share fishermen. Tick this box if the client is required to pay the higher rate.
- ‘Date started self-employment (if during year)’ If the client started self-employment during the year, enter the date here. This field is not automatically completed by Taxfiler from the Self Employment data entry area.
- ‘Date ended self-employment or reached retirement age (if during year)’ If the client stopped being self-employed during the year, enter the date here. This field is not automatically completed by Taxfiler from the Self Employment data entry area
- ‘Calculated amount’ This field will display the calculated amount of Class 2 Contributions for the year.
- ‘Enter a figure to override the calculated amount (optional)’ Use this field to override the calculated figure, otherwise leave the field blank.
Class 4 National Insurance
This section displays the calculation of Class 4 Contributions for the year BEFORE limiting the contributions to the Class 4 Maximum Charge.
Class 4 National Insurance maximum charge
If a taxpayer is both employed AND self-employed, Class 4 Contributions may be reduced because of Class 1 and Class 2 contributions made in the year.
Enter the required details from the P60. If you have more than one P60, add up the figures for all employments.