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For National Insurance Contributions applicable to payroll are Class 1 and Class 1a, see NIC.
Self employed people pay Class 2 contributions at the rate of £2.00 per week for the years ended 5 April 2001, 2002 and 2003, reduced from £6.55 per week for the year ended 5 April 2000. These contributions can be paid on invoice every 13 weeks or by direct debit every 4 or 5 weeks.
An exemption from Class 2 applies for earnings of less than £3,955 for the year to 5 April 2002 (2001 £3,770, 2003 £4,025). Earnings are apportioned over the tax year to 5 April so the tax year to 5 April 2002 could be based on 11/12 year to 28 February 2003 and 1/12 year to 28 February 2003. A claim for repayment must be made by 31 December 2002, before the February 2003 accounts could possibly be available. A claim for repayment has to be submitted using estimated figures, or an advance application for exemption. An Inland Revenue booklet (CA02) and application form (CF10) is available at http://www.inlandrevenue.gov.uk/pdfs/nico/ca02.pdf.
Self employed people also pay Class 4 contributions with their Self Assessment Tax liabilities in January and July each year. These are calculated on Self Employed earnings as follows -
| 2002/03 | 2001/02 | 2000/01 | 1999/00 | |
| Upper limit | £30,420 | £29,900 | £27,280 | £26,000 |
| Lower limit | £4,615 | £4,535 | £4,335 | £7,530 |
| Percentage | 7% | 7% | 7% | 6% |
| Maximum contribution | £1,806.35 | £1,775.55 | £1,606.15 | £1,108.20 |
If you have multiple employments, or are employed and self employed, you should apply for deferment of contributions or a refund if your total contributions exceed the maximum Class 1 contributions. An application form is available at http://www.inlandrevenue.gov.uk/nic/forms.htm.
The above applies to Partners in a business except "Sleeping Partners" who supply capital and take a share of the profits but have no active part in running the trade. Sleeping Partners are exempt from Class 2 and Class 4 Contributions.
Class 3 contributions can be paid on a voluntary basis to enhance state pension entitlement in years when other contributions are not sufficient. The rate is £6.75 per week for the year to 5 April 2002, £6.85 from 6 April 2002. A pension forecast can be obtained by completing form BR19 - see State Pension Entitlement.
The Inland Revenue publishes its guidance manuals for NI at http://www.inlandrevenue.gov.uk/manuals/nimmanual/index.htm.
See also State Pension Entitlement.
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