National Insurance Contributions

HMRC also updated the self-employment, partnership and Lloyd's supplementary pages to include an option to indicate that Class 2 contributions are voluntary for small earnings, and to remove the option for deferment of Class 4 contributions, as this is now included as part of the Tax Calculation.

Entering your data

Sage Personal Tax has a single data entry screen for dealing with National Insurance contributions, which can be accessed in a variety of ways:

• Select Earned Income, National Insurance contributions
• When viewing the tax return, click the Edit National Insurance contributions from the list of tasks on the left hand side
• From the Tasks menu choose Edit National Insurance contributions

Example:

The information entered here will be used in the Tax calculation which provides details of all the NIC calculations in the National Insurance appendix, where relevant.

Class 2 National Insurance

Where your client is liable to NIC you will need to calculate and enter the Class 2 amount due for the tax year.

As there are external factors that may affect the liability for Class 2 NICs, you'll need to determine your client's liability to Class 2 NI contributions based on the number of contribution weeks for the period of their business(es) in the tax year.

Voluntary Class 2 contributions

You can only make voluntary contributions with business earnings under the voluntary threshold.

If voluntary Class 2 contributions are to be made, this can be indicated by ticking Taxpayer is choosing to pay voluntary Class 2 NIC's and entering the amount due.

Rates:

Year	Number of weeks	Weekly rate	Maximum annual amount	Voluntary threshold
2019-2020	52 weeks	£3.00	£156.00	£6,365
2018-2019	52 weeks	£2.95	£153.40	£6,205
2017-2018	52 weeks	£2.85	£148.20	£6,025
2016-2017	52 weeks	£2.80	£145.60	£5,965
2015-2016	52 weeks	£2.80	£145.60	£5,965

If Class 2 NICs don't appear, the business earnings are likely below the threshold and the contributions are voluntary. You'll need to mark them as such by ticking Taxpayer is choosing to pay voluntary Class 2 NIC's. This will complete box 100 on SA103F or box 36 on the SA103S.

Class 4 National Insurance

Tick the "Exempt from paying Class 4 NICs" box to show that your client is not liable for these contributions.

An adjustment to profit on which Class 4 NIC is due can be entered for the return and Tax calculation. This will adjust the Class 4 liability if you have (for example) a loss making self-employment and a profit making partnership. See HMRC manual NIM24615 for the availability of such an offset.

Example:

The national insurance appendix includes the calculation of the Class 4 liability

Rates:

Source: .GOV.UK website

From 2015/16 onwards, you can no longer defer Class 4 National Insurance contributions. For more information on this please visit the .gov.uk website.

Class 1 National Insurance

Where your client also has employment earnings liable to Class 1 NICs they should enter the earnings between the Primary Threshold (PT), Upper Accrual Point (UAP) and Upper Earnings Limit (UEL). These can be found on the P60 in boxes 1c and 1d (where displayed).

These figures will be used in the calculation of Class 4 NICs maximum value due under Regulation 100 (based on self-employment income).

If your P60 only has one box labelled Earnings above the PT, up to and including the Upper Earnings Limit (UEL) you can enter this figure into either box. 

Show me an example

Where there are Class 1 earnings, the appendix shows the calculation of the maximum Class 4 NIC under Regulation 100

Rates:

Why are my Class 2 contributions not showing?

• If the profit from the self employment is over the £5965 threshold, ticking the "Taxpayer is choosing to pay voluntary Class 2 NICs" box will remove the figure from box 4.1 on page TC1 of the Tax Calculation summary and select box 100 on page SEF5 of the Self-Employment (full) or page SES2 box 36 of the Self Employment (short) pages instead. You should untick this option as the contributions will not be voluntary.
• If the self employment income is below £5965 you may make voluntary contributions. This will populate both box 100 on SEF5 (or box 36 on SES2) and 4.1 on TC1
• Ticking "Taxpayer is excepted from paying Class 4 NIC" will remove the figure from box 4.1, but will leave box 100 on SEF5 (or box 36 on SES2) ticked.

Are my Class 2 contributions voluntary?

Businesses with profits under £6,365 (2018-19) will need to make voluntary Class 2 contributions as they are not compulsory below this cut off. For further information please see HMRC's website.

Why am I getting a validation stating the Class 2 NIC must be greater than zero when none is due?

This validation message may vary depending on the schedules you have present, but will refer to the NIC box and state "The value must be greater than £0.00".

This can be corrected by selecting "Edit National Insurance Contributions" or returning to the data entry screen and selecting "National Insurance Contributions" and removing the £0.00 from the Class 2 box, leaving it blank. The return will now pass this HMRC validation.

Are Class 2 contributions taken into account when calculating Payments on Account?

Class 2 National Insurance contributions are not taken into account when calculating Payments on Account. For further information please see Page 9 of National Insurance Contributions Bill Section 11A(2) which states "But section 59A of the Taxes Management Act 1970 (payments on account) does not apply in relation to Class 2 contributions under section 11(2)."

Why should I check the NIC amounts I've entered?

On the NIC data entry screen there is an advisory note recommending that you check the amount of NIC contributions you have entered.

After a return is submitted, HMRC will run it's own tax calculation to check the tax liability. However, in this calculation HMRC will use the NIC figures it holds, rather than the figures you've submitted

To avoid post-submission NIC calculation amendments, you should therefore check that the figures you've entered agree with those held by HMRC before submitting the return

How do I check the NIC contributions held by HMRC?

To check the NIC amounts held by HMRC:

1. Log into HMRC Online Services
2. Click Self Assessment, [Your current client], Tax Return Options
3. Click Information to help complete your tax return and select Additional information

The Additional information page will show their total Class 2 NICs due and total Class 1 earnings between the Primary Threshold and Upper Earnings Limit.

If you disagree with these figures, or their total Class 2 NICs show as "Not available", please contact HMRC to resolve the issue before you submit your clients return

My P60 only has one box for Class 1 National Insurance

Older P60s have two boxes which split earnings between the Primary Threshold (PT), Upper Accrual Point (UAP) and Upper Earnings Limit (UEL) as reflected on the data entry screen.

This year's P60's combine this amount into one figure labelled Earnings above the PT, up to and including the Upper Earnings Limit (UEL).

You can use either box in the software to enter the earnings as a total as they are combined into one figure for the return. This was updated in v21 of Sage Personal Tax to reflect this layout.

I'm getting a message saying that this client isn't liable to for Class 2 or Class 4 NICs when trying to enter Class 1?

There used to be Class 1 boxes in the employment section, but they didn't adjust any figures or populate the return, but the details would show on the data schedules for reporting purposes. These data entry boxes were removed for 2017. To enter any adjustment from Class 1 National Insurance, you need to have entered a self-employment or partnership.

For further information, please visit HMRC's website

I'm getting a message saying that this client isn't liable to for Class 2 or Class 4 NICs when trying to enter the National Insurance window?

The National Insurance window is only relevant if you have either self-employment or partnership income and can be used to enter any Class 2 National Insurance, any adjustments to profit for Class 4 National Insurance and for calculating the maximum Class 4 liability by referencing any income liable to Class 1 National Insurance under Regulation 100. If you only have Class 1 National Insurance contributions, this screen won't be relevant for your client.

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