National Insurance explained

National Insurance is paid to give you an entitlement to certain benefits.  These include state pension, contribution based Jobseekers Allowance and Employment and Support Allowance. National Insurance is paid by both employees and the self-employed.  The classes paid are different and this is where I believe the confusion arises. There are 4 different classes of National Insurance contributions that can be paid. Here is a description of each: Class 1 national insurance (employed) Paid by employees and deducted at source from your pay Class 2 national insurance (self-employed) Paid by self employed people with profits of more than £5,965 per year (although you must apply for exemption and are not automatically exempt even if your profit is below this level) Class 3 national insurance (voluntary) Voluntary contributions that can be paid to avoid gaps in contribution history. This will mean you keep your entitlement to certain benefits Class 4 national insurance (self-employed) Paid by self employed people with profits of more than £8,060 per year Current rates can be found here: Rates Employee National Insurance is calculated by your employer and deducted from your pay before you receive it. Your employer pays it to HMRC on your behalf. You need do nothing at all. But you can check whether your contributions are up to date using the online form here: NI contributions check If you are self-employed then class 2 contributions will shortly be payable at the same time as your self assessment tax. However you may have been paying either twice per year on receipt of a statement or monthly by direct debit. This will change in 2016...

Maternity allowance for the self-employed woman

As a self-employed single mother this topic is very close to my heart, especially as I’m writing this a week after my baby was due and am still pregnant! If you are self-employed and pregnant, or planning a family, you will be aware that your maternity rights in the UK are different to those of the employed woman but how different, and what are you entitled to? Well to begin with, your business is your own and is unique so only you can decide how much time you are able, or want, to take off. I shan’t attempt to cover the many options available to you. Suffice it to say that in my own case my clients are keen to have me back and it’s a careful balancing act between keeping them happy and spending time with my precious new born. Maternity Allowance Maternity Pay (or SMP) is paid by employers to eligible women. Maternity Allowance is the alternative for those who are not eligible or are self-employed. You may be eligible for MA for up to 39 weeks if: You’re employed but can’t get SMP You’ve recently stopped working You are registered self employed and up to date with Class 2 NIC’s having paid them for 13 of the 66 weeks before your baby is due During the 66 weeks before your baby is due you’ve been employed or self employed for at least 26 of those weeks You’ve earned at least £30 per week over a 13 week period during the 66 weeks before your baby is due There is an eligibility calculator here: https://www.gov.uk/pay-leave-for-parents/y There are...

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Help – I can’t pay my tax

Being unable to pay your tax bill is a scary situation to be in. Going to sleep at night thinking “I can’t pay my tax” is not conducive to a sound night of rest. Perhaps you have received a notice from HMRC that your employer has not deducted enough tax from your earnings, or you are self employed and haven’t set aside enough money for the tax bill. However you discover that you can’t afford your tax there is one golden rule – DO NOT IGNORE HMRC Burying your head in the sand may be the most attractive option but facing the problem and tackling it early is the best way to receive co-operation and support from our Revenue and Customs personnel. Firstly, read carefully whatever correspondence you have received. This may be simply your self assessment statement or may be a letter detailing what you owe. Either way make sure you understand the amount that is due and the date by which it is due to be paid. Penalties can be added on when payments are made late or not at all but in many cases open and honest communication with HMRC can mean leniency and perhaps even a waiver of penalties. Swallow your pride and pick up the phone to speak to their advisors. When you do this you will need to have your national insurance number, self assessment UTR if you’re self employed, and any other relevant information. The letter or statement you’ve received should show you the appropriate number to call. If the amount is not correct It is possible that the amount that HMRC...

Should I register for VAT?

Many small business owners ask whether they should register for VAT and this post aims to clarify when you should register and also address some pros and cons of voluntary registration. Mandatory VAT registration Legally, you must register for VAT if your turnover in the previous 12 months (not your last financial year but a rolling 12 months) has exceeded £82,000 (as at the time of writing) or if you know that you will exceed this threshold. If you have a bookkeeper then they will know whether you have exceeded this and will be able to advise on registration. This registration is mandatory and if you fail to register in time HMRC can make you pay the VAT on sales from the time you should have registered – potentially a costly error. Bear in mind that this figure is turnover and not profit, so is the amount of all of your sales before taking off any costs. Voluntary VAT registration A business with a turnover of less than the threshold can still choose to register for VAT voluntarily but this is a decision with consequences and a decision should not be taken lightly. If you choose to register voluntarily and later decide that this is the wrong decision then you can deregister at any time as long as your turnover remains under the threshold. Any bookkeeper or accountant will be able to talk to you about your own business and the implications of voluntary registration but I will lay out a few pros and cons very briefly here. Pros The ability to reclaim VAT on VATable purchases such as...