INCOME TAX & NATIONAL INSURANCE
INCOME TAX ALLOWANCES
1) This Personal Allowance goes down by £1 for every £2 above the income limit. It will not go below the standard Personal Allowance for that year.
INCOME TAX RATES AND TAXABLE BANDS
|Starting rate for savings 10% (0% from 2015-16)||0-2,790||0-2,880||0-5,000|
|Basic rate 20%||0-32,010||0-31,865||0-31,785|
|Higher rate 40%||32,011-150,000||31,866-150,000||31,786-150,000|
|Additional rate 45%||Over 150,000||Over 150,000||Over 150,000|
The 40% and 45% thresholds can be increased if the taxpayer pays personal pension contributions or makes Gift Aid donations.
The 10% starting rate applies to savings income only. If after deducting your Personal Allowance from your total income liable to income tax, your non- savings income is above this limit then the 10% starting rate for savings will not apply. Non- savings income includes income from employment, profits from self employment, pensions, income from property and taxable benefits.
The rates available for dividends are the 10% basic rate, the 32.5% higher rate and the dividend additional rate of 37.5% (for dividends paid from 6 April 2013). The additional rate for dividends paid before 6 April 2013 is 42.5%.
We appreciate this is quite complex. If you receive dividend income please contact us and we will be happy to explain it to you.
WHO PAYS NATIONAL INSURANCE?
You pay National Insurance Contributions if you are an employee or self employed and are 16 or over, as long sas your earnings are above a certain level.
HOW MUCH NATIONAL INSURANCE DO YOU PAY?
The amount and type of National Insurance Contributions you pay depends on whether you’re employed or self employed and how much you earn. The rates below are for the 2014-15 tax year.
IF YOU’RE EMPLOYED
If you’re employed you pay class 1 National Insurance Contributions. The rates are :
- If you earn more than £153 per week and up to £805 per week you pay 12% of the amount you earn between £153 and £805.
- If you earn more than £805 per week you also pay 2% on earnings above £805 (in addition to the above).
You pay a lower rate if you’re a member of your employer’s contracted-out pension scheme.
Your contributions are deducted from your wages by your employer.
IF YOU’RE SELF EMPLOYED
If you’re self-employed you pay class 2 and class 4 National Insurance Contributions.
The rates are :
- Class 2 National Insurance Contributions are paid at a flat rate of £2.75 per week.
- Class 4 National Insurance Contributions are paid as a percentage of your annual taxable profits – 9% on profits between £7,956 and £41,865. A further 2% is payable on profits above that amount.
Please note that taxable profits are not the same as accounts profits. Taxable profits are arrived at by taking the profit figure on your accounts and then adjusting it for items of expenditure which are not allowable for tax purposes (and items of income which are taxed differently to trading income).
If your profits are expected to be less than £5,885 you may not have to pay class 2 National Insurance contributions.
Your class 2 National Insurance contributions are due on 31 January and 31 July, the same as a Self Assessment tax bill. You pay class 2 National Insurance contributions either monthly or 6 monthly by direct debit.
You pay class 4 National Insurance contributions when you pay your Income Tax.
THE RATES FOR THE 2015 – 16 TAX YEAR ARE AS FOLLOWS :
IF YOU’RE EMPLOYED (CLASS 1 NATIONAL INSURANCE CONTRIBUTIONS)
- If you earn more than £155 per week and up to £815 per week you pay 12% of the amount you earn between £155 and £815.
- If you earn more than £815 per week you also pay 2% on earnings above £815 (in addition to the above).
IF YOU’RE SELF EMPLOYED (CLASS 2 & CLASS 4 NATIONAL INSURANCE CONTRIBUTIONS)
- Class 2 National Insurance contributions are paid at a flat rate of £2.80 per week.
- Class 4 National Insurance contributions are paid at a rate of 9% on taxable profits between £8,060 and £42,385. A further 2% is payable on profits above that amount.
From the 2015-16 tax year the small earnings exception haas been abolished for the purposes of class 2 National Insurance Contributions.