What is national insurance?
You pay National Insurance contributions to build up your entitlement to certain state benefits, including the State Pension. The contributions you pay depend on how much you earn and whether you're employed or self-employed. You stop paying National Insurance contributions when you reach State Pension age.
There are two types of national insurance for self-employed people:
Class 2:
This is where you pay contributions at a flat rate of £2.50 a week. However, if your earnings are below £5,315 per year (2011-12) you might not need to pay.
Class 4:
The amount of Class 4 National Insurance contributions you have to pay for any tax year is based on your profits for that year. You pay 9 per cent on annual profits between £7,225 and £42,475 (2011-12) and 2 per cent on any profit over that amount. You pay this every 6 months if you qualify for it. If you earn under £7,225 then you do not qualify for class 4 national insurance, and you only pay class 2 national insurance.
Again this was a topic I had very little knowledge on so it was very useful to learn about it. I did not know that there were different types of national insurance. I originally thought there was only one type. I also didn’t really know what national insurance money went towards ether. So I have learnt a lot from this study. I did most of my research on the HMRC website, which I found very useful.
No comments:
Post a Comment