National Insurance Contributions

I think you may need to make some of about £2 a week (can't remember if it class 1 or 2 etc) but you must make sure you register as self employed within three months or risk a £100 fine.
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www.youcangetit.co.uk - Business services and community. Do you get it?

Class 2, currently £2.05 a week. However you may be able to negate that payment until you start making a profit, however you must talk to the inland revenue. As Adam said, £100 fine if not. If you are a sole trader you pay class 4 NI on all your profits above a certain level, around £4700. The sole trader model assumes that any trading profits goes to you as payment, rather than taking a wage. Unfair, isn't it? Regards, Richard
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Regards,
Richard
Retail World - Supporting Retailers Across the UK
www.retailforum.co.uk

Class 2 is only due if you your sole trade makes more than the threshold - £4.5k per annum, not just profit. In terms of the timing of the payments, the class 2 is paid monthly or quarterly as you go along once you have registered as self employed, the class 4 is paid along with your income tax. As a sole trader your income is assessed simply on what you have earned, not what you draw out to use personally.
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

So I was half-way there then! To clarify, that is the turnover exceeds £4.5k? I was budgeting to pay Class 2 NI anyway, but first-year profits won't top £4.5k. Cheers James, Richard
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Regards,
Richard
Retail World - Supporting Retailers Across the UK
www.retailforum.co.uk

It is also important to make sure you make the minimum NI contribution to make sure the tax year counts towards your state pension (assuming it exists when we get to retire[] Bit of a tricky calculation if you have been both employed and self employed in same tax year.
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Barr Stevenson
Chartered Accountant
http:/www.jsaccountants.co.uk

Thanks for the advice all. In this tax year I was working full time, then part time, then set up the Limited business. Does the advice differ in this situation?
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http://www.qualityeye.com
Focus Group Recruitment/ Mystery Shopping Services

Richard - its profits not t/o, and the NI is optional below this. As Barr points out if you don’t pay enough NI you do (in theory) not get a state pension, but then it is topped up be means tested benefits. You have to have quite large gaps for this to be an issue. Misstique - the above applies to sole traders. If you are running a limited company you will extract funds via a dividend and a small salary. Paying a small salary equivalent to the personal allowance will "buy" your NI stamp. As I have mentioned quite a few times on here - if you have a ltd company you really need to get proper advice from your accountant. Please don’t rely on comments on here as things can get quite complex. Regards,
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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

Thanks James. I am currently still working part-time while I set-up my venture, and paying tax and NI through my employer. Like I say, I doubt profits would rise to over the threshold in the first year anyway. VAT Registration Application is going in the post tomorrow! Thanks again, Richard Retail World
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Regards,
Richard
Retail World - Supporting Retailers Across the UK
www.retailforum.co.uk