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Class 4 NICs who is liable?

18 April 2024

Self-employed individuals with profits over £12,570 must pay Class 4 National Insurance contributions (NICs). Rates for 2024-25 are 6% for profits between £12,570 and £50,270, and 2% above this. Certain groups are exempt. Contributions fund public services, making understanding tax obligations crucial for societal contribution.

If you’re a self-employed individual and your profits exceed £12,570 in a year, you’ll need to contribute to Class 4 National Insurance (NICs). The tax year 2024-25 has set Class 4 NIC rates at 6% for profits ranging from £12,570 to £50,270. Profits exceeding £50,270 attract an additional 2% charge.

Certain groups of people are exempt from contributing to Class 4 NICs. These include individuals who are under 16 years old or those over the State pension age at the start of the assessment year. However, if a person reaches the State pension age during the assessment year, they must contribute to Class 4 NICs for that entire year.

Trustees, guardians, and others responsible for an incapacitated person also don’t need to contribute to Class 4 NICs on the income they manage for that person.

Interestingly, the Class 4 NIC rate is lower than the rate for employees. Employees contribute 8% of their income to National Insurance at the same income levels. Both employees and self-employed individuals contribute 2% of their income above the higher rate threshold to National Insurance.

This system ensures everyone working contributes fairly to the nation’s welfare services. It’s part of the government’s commitment to support those in need while maintaining a balanced economy. So, whether you’re self-employed or an employee, your contributions are vital for the country’s growth and prosperity.

Understanding your tax obligations is not just about compliance, it’s also about contributing to a better society. It’s important to remember that these contributions help fund public services like healthcare, education, and infrastructure. By fulfilling your tax obligations, you’re playing a crucial role in building a stronger and more prosperous nation. So, let’s all do our part and contribute responsibly. Remember, every contribution counts!

Source: HM Revenue & Customs Tue, 16 Apr 2024 00:00:00 +0100

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