National insurance (NI) is payable on all employment income and trading income of sole traders and partnerships.
For employment income, national insurance is paid by both the employee and the employer. The employee’s rate of national insurance is currently 12% for income that falls into basic rate tax and 2% for income in higher rate tax. The employer’s NI rate is 13.8% for both basic and higher rate tax.
This is one of the reasons why the deductions made when working through an umbrella company are so high, as both the employee’s and employer’s NI deductions will be taken from your invoiced amount. This also applies if all earnings are taken from a limited company as salary, rather than a small salary and dividends.
Sole trade and partnership income is subject to two classes of national insurance: a set rate of class 2 national insurance of £2.80 per week is payable if your profits for the year exceed £5,965; and class 4 national insurance is payable at 9% on profits between £8,060 and £42,385, and at 2% for profits over that. From 2015/16 tax year both class 2 and class 4 national insurances are calculated in the self-assessment return to HMRC at the same time as income tax.
Why Integro Accounting?
Integro Accounting is the UK’s only specialist provider of fixed fee, limited company accountancy services for contractors, consultants and freelancers that was established to an award winning standard – our Practice Manager, Maria Williams, won The British Accountancy Awards’ ‘Accountant of the Year’ in 2011.
We were set up with the vision of providing a service that is the ultimate for the dynamic, busy professional of today in a language you understand.
Integro Accounting have designed a bespoke service for the contractor who is always on the go; never forgetting that one size will never fit all.
The relationship you have with your accountant is the most important factor in our service which is why we will always offer unlimited contact with your own personal accountant; whether that contact is via the phone, email or face to face.
We have our 3 offices located in London, the South-West and on the Bedfordshire and Buckinghamshire border. There are also meeting locations in many of the major cities and towns across the Home counties, South-West and South Wales, all conveniently placed so that you never have to travel far to meet your accountant.
If you have any questions about contracting or would like to find out more about how Integro Accounting can help you and business please call Christian on 01525 303984, email firstname.lastname@example.org or request a callback.