Starting up:
Class 2 and Class 4 contributions
Class 2 contributions are payable by most self employed people, unless they are excepted on the grounds of small profits. For 2006/07 the rate is £2.10 per week, payable if earnings exceed £4,465 per annum. Class 2 NIC is paid either by direct debit or on invoice:
- If you pay by direct debit you will pay monthly, normally on the second Friday of the month. The amount of the monthly payment represents either four or five weeks' contributions, depending on the number of Sundays in the previous tax month.
- If you pay on invoice you will be sent a bill quarterly in January, April, July and October.
We recommend, for convenience, that you set up a direct debit.
Class 4 contributions are paid by self employed people, but the amount payable is based on your profits. For 2006/07 there is no charge if your profits are less that £5,035. Profits of between £5,035 and £33,540 are charged at a rate of 8% and any excess profit above £33,540 is charged at 1%, without any upper limit.
Class 4 contributions are collected under the self assessment system, and so your contributions for 2006/07 will be collected as follows:
- on 31 January 2007, first payment on account (normally 50% of 2005/06 liability)
- on 31 July 2007, second payment on account (normally 50% of 2005/06 liability)
- on 31 January 2008, balancing payment.
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Where next?
Within National Insurance ContributionsWithin Starting up ...
- Developing your business idea
- Your business structure
- Setting up
- Accounting systems
- Payroll and PAYE
- National Insurance contributions
- VAT
- Income tax
- Corporation tax
- Contact us about this issue
- Read about how we can help you & your family
- Request a meeting with us
