EPAPP/3 - Classes of National Insurance contributions
THE CLASSES OF NATIONAL INSURANCE CONTRIBUTIONS
Under the Social Security Act 1975, a basic scheme gives entitlement to a flat rate pension in return for contributions payable in the following classes.
- Class 1 An earnings related contribution divided into two parts
- primary Class 1 contributions payable by employees and office holders
- secondary Class 1 contributions payable by employers.
- Class 1A a charge on employers who provide cars and fuel for the private use of their directors and higher paid employees. (There is no charge on the actual director or employee.)
- Class 1B Introduced on 6 April 1999. They are payable whenever an employer enters into a PAYE Settlement Agreement (a PSA) for tax. They allow employers to deal with NICs on items included in PSAs in the same manner as the tax - that is, in a lump sum after the end of the tax year.
- Class 2 A flat rate weekly contribution payable by self employed persons.
- Class 3 A voluntary flat rate contribution payable by persons not liable under Classes l or 2.
- Class 4 A contribution payable by the self employed as well as the Class 2 contribution. It is calculated as a percentage of assessable Schedule D Cases 1 or 2 income. Form P241 gives you details of the rate and limits of charge for each year.
There is a CA leaflet FB14 which gives a broad outline on what you pay and what you get.
