Re: NI, tax and part time jobs

Many thanks for your reply. I knew the figure was in that area but not sure of the exact amount.

But IIRC earlier posts said that NI rules were applied to each job separately. Therefore in neither employment would I be in the magic window where no NI is paid yet is credited to me.

I also thought the rules for being a director were different as well.

I forgot about that.

It is true that if you had two jobs, each paying £3000, you would pay no NI because neither of them exceeds £4615 even though they do when added together (unlike income tax, for which purpose they *are* added together). But I also think that you would still be credited with NI entitlement provided the aggregate is at least £4615. If I'm wrong about that, then the worst case is that you'd have to pay voluntary class 3 NI (about £365 per year), or alternatively you would have to pay yourself a company salary of £4615 and pay income tax on your other part-time income. £40pw is £2080pa which is only £160 about the lower rate threshold, giving a tax bill of just over £227.

I'm not sure how the NI crediting works. It may be that you only need to pay enough C3NI to top up your qualifying salary to the £4615 level (each £6.95 contribution counting as £77 income (one week at the LEL)). Obviously you should top up in this way the higher of your two employment incomes, so that there is less to top up. E.g. if one job pays £2080 then you get the company to pay you £2535 to keep income tax zero, then you would probably need to make 28 weeks' contributions of £6.95 because 28 times £77 brings £2535 up to £4615 or above. That would be about £195 to pay.

If you are receiving WTC you may already be getting NI credits, so this C3 malarky may be unnecessary.

If the WTC/CTC is based on your low part time employment income of £40pw, then paying yourself any money from the company may affect that entitlement, and if so may have repercussions for NI credits.

I don't think so. You just need to be clear whether the remuneration is salary or dividend. Salary is paid from the company's pre-tax earnings (i.e. pre corporation tax) and is subject to personal tax and NI, whereas dividends are paid from the company's post-CT profits and are not subject to NI, nor to further income tax unless the recipient is into the higher rate tax band.

There's no money for any dividend! No my though was for us to use the tax free income for this FY and to convert it to a capital repayment the year after or so.

I don't know whether I am the primary carer for a child has any bearing on NI contributions.

I thought directors were treated differently in that the NI contributions are aggregated throughout the year. I recall one argument for this as "They could pay themselves all their annual income in just one month and pay NI only for that month. Hence much less than if it was spread throughout the year".

No. That is not correct.

No. That is not necessary. In order to get a credit for NI you need earnings exceeding the 'Lower earnings limit' which is £75pw/£325pm/£3900pa.

In this case you will have a tax bill of £137.50 with no NI to pay, but still have a NI credit.

NI rules for Directors are different, but shouldn't affect your case. If a director is paid weekly, monthly, or at irregular intervals, NI is worked out on a cumulative basis rather than a payment interval basis.

DF

But this then means that what I said was correct after all (except for the £4615 becoming £3900), the salient point being that relevant earnings don't need to come from any *single* employment. So if two employments each give £3k, he would have earnings of £6k, getting NI credit, but paying no NICs because each employment is below LEL.

My £4615 figure is correct in relation to self-employed income. For employment income it would be as you say, except that the LEL is £77pw now.

So Fred should be OK, NI-wise, if he pays himself at least £77-£40 per week, which would still leave him with a zero income tax bill. Does he need to make sure his earnings *each week* exceed £77 or is it enough for his earnings for the whole year to exceed £4004, if he pays himself a single lump sum from the company?

What effect would that have in other cases?

Yes they do. Earnings reaching the annual LEL from one employment has to be met to earn a credit. NI earnings are not added together except in the case of working out if too much NI has been paid, and then it's only the NI that's added together not the earnings.

Precisely - because each employment earnings are below the LEL then there is NO credit. Earnings are not aggregated.

Sorry - I looked at wrong table. It is £77pw/£334pm/£4004pa

No. He needs to pay himself £77.01 per week or one payment of £4005

Because he is a Director of his company then one lump sum of £4005 will do.

Sorry, do you mean you don't know the difference between cumulative and single payment intervals. Let me explain, or perhaps you might have a look at leaflet CA44

the leaflet itself is in PDF format. If you pay a non director more than the Earnings Threshold(ET) then NI is due, if the following week/month you pay less than the ET then no NI is due irrespective of what the previous earnings were. This means that someone could earn less than the annual ET but still have paid NI because some weeks/months he was paid above the ET.

However for a director no NI is due until earnings to date (since 6th April) reaches the ET then all subsequent payments are subject to NI. Thereby a director could have his salary of say £4005 paid on 30th April and not pay NI as long as no more payments were made to take him above the ET before 5th April.

DF

OK.

OK, that contradicts what you said earlier, a few paragraphs back. After you said "will have a tax bill of £137.50 with no NI to pay," the "but still have a NI credit" which followed should have been "and still have no NI credit". That threw me, but I guess it was that famous relative of the typo, a thinko. Thanks for clearing that up, I take it the "no" version wins.

And it should have been £138.50, not £137.50. :-)

Many thanks.

If you get child benefit, then you get HRP which reduces the number of years you need to pay NI to get the full basic state pension. It also gets you credits towards the Second State Pension. This makes it almost as good as getting NI credits (as far as the state pension is concerned anyway). Note that child benefit gets you HRP, NOT who you put down as the main carer on your CTC claim. Also I think you have to get child benefit for the full tax year.

The other thing to bear in mind is that if your plan takes your *joint* income [1] above 5060 (up to at least 18800) this will reduce your tax credits by 37% of the amount over 5060. Although if your income is greater than the previous year they let you off the first 2500 increase for the first year only.

[1] Most taxable income counts, eg salary, savings income (minus the first 300) etc. Tax free income such as CB/WTC/CTC/ISA/PEP income doesn't count. This is assessed jointly, ie you and your partner's income.

"Andy Pandy" wrote in message news:bj9n8q$3a6$ snipped-for-privacy@newsg2.svr.pol.co.uk...

Slightly off-topic, but the 37% reduction has the effect of increasing considerably the effective relief on any approved pension contributions (providing you're outside the 2.5k band you mention).

Indeed, could get 59% effective tax relief on pension contributions. Or even 77% in some cases.

"Andy Pandy" wrote in message news:bj9n8q$3a6$ snipped-for-privacy@newsg2.svr.pol.co.uk...

Bugger I only started claiming CB since end of May and because of their rules meant I didn't start to receive it until the beginning of July! Sorry for my ignorance but what is HRP and how does this differ to NI.

I do find the effective amount of taxation from 5060 upwards quite incredible. If you add to that housing benefit (rent) at 65% of residual income and HB (council tax) of 20% added to that - well!

ISA/PEP I can dream!

"Andy Pandy" wrote in message news:bj9s8s$82k$ snipped-for-privacy@newsg2.svr.pol.co.uk...

Are there any links to these numbers etc. I thought that allowable contributions to a pension were limited to 15% of salary. Can I pay money into part time job pension fund (quite feasible) based upon overall income?

I would like to thank all the contributors to my question.

We're not talking about the percentage of salary you can contribute, but the "tax relief" you get (BTW I think you can contribute 3600 to a pension scheme however little you earn).

Example: someone who earns 15000 and is claiming CTC/WTC. They put 15000 down as last years income on their CTC/WTC claim form. If they decide to contribute

2000 (gross) to a pension scheme they'll get 22% tax relief, plus they'll get 37% extra in WTC/CTC, as the contribution has reduced their taxable income and CTC/WTC is based on taxable gross income.

Of course most such people couldn't afford to make big pension contributions, but if they've got savings to live on it could well be worth it.

Home Responsibilities Protection. You need 44 years of NI contributions for a full basic state pension. If you have, for example 34 years NI contributions and HRP for the other 10, you'll still get the full basic state pension.

There should be details with the CB stuff they sent you, otherwise pick up a leaflet on CB at your post office. Or have a search on

Yes, with HB/CTB plus tax credit reductions it works out to an effective marginal tax rate of 95.5% for a basic rate tax payer!

"Andy Pandy" wrote

Perhaps just goes to show what a "good deal" those on lower incomes are getting, compared to those on slightly higher incomes!

Or even very much higher incomes. A bit of an extreme example I know, but following a query on uk.gov.social-security from an unemployed man with 7 kids, I worked out he'd have to earn around 45000 to be just 10% better off than on the dole. The tax credits and benefits systems are very helpful to families on low incomes, and independant taxation is very un-helpful to families on average/above average incomes.

"Andy Pandy" wrote in message news:bja41v$icr$ snipped-for-privacy@newsg4.svr.pol.co.uk...

contributions and

I'm sure that you only get HRP while your Child Benefit claim includes children under 5 years old, and then only for complete tax years.

BTW as a director you will get a SATR to fill in where all your income will become cumulative.

Good luck Jan

Gordon only promised not to increase tax rates for rich people ....