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 tax payer 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 tax payer 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 tax payer 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.
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.
- ‘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.
- ‘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 tax payer 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.