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How Do You Save Paying National Insurance ?

Posted by: on Aug 25, 2012 | No Comments

I was reflecting on what work I had done this week and thought it would be useful to pass on a client scenario I researched this week.

A private client who is employed as a company director at a medium sized company changed employer last year. He earned above the higher rate tax band in both companies. Directors often pay national insurance contributions (NIC) cumulatively so potentially 12% employee national insurance paid in the basic rate tax band at both companies. I investigated whether we could get him a NIC rebate and concluded that if the second employer pays NIC on a cumulative basis you can send a letter to HM Revenue & Customs (HMRC) to request a rebate.

That lead me to thinking of the other potential savings you can make on national insurance contributions:

If you have two or more jobs during the tax year ending 5th April 2013 you can earn approx £7,500 in each job before you pay NIC;

If you have a job and are self employed during the tax year ending 5th April 2013 you can earn approx £7,600 before you pay class4 NIC on the self employment (plus the approx £7,500 in the job before you pay NIC);

If you earn less than £5,564 profits from self employment in the tax year ending 5th April 2013 you can write to HMRC to get a rebate of your class 2 NIC;

If you are employed and self employed in the same tax year and are a higher rate taxpayer it is likely that you can get a rebate of Class4 NIC;

If you are a Director/Shareholder of a small Limited Company you can pay no Tax and no NIC up to the NIC personal allowance and pay no NIC on dividends. There are a lot of other factors affecting your decision to set up a Limited Company and you can refer to my other blog for that.

As always Sir Tax Accountants in the Camberley area will do everything we can help to reduce your taxes so feel free to contact me if you require any clarification of the above on 01276 451465, mike@sirtax.co.uk

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