BTX Self Employed NIC -FA11

Hi Guys

Just trying to work through the Kaplan Revision Kit for FA 2011
Stuck on a question on NIC - if anyone could help.
Page 40 Question 77 - Carter

Carter, who has been trading for many years draws up accounts to 31 December each year.
The results of the business are as follows:-
Accounting Profit Taxable Profit
Y/E 31 December 2011 £8500 £3000
Y/E 31 December 2012 £7678 £2500

It says the answer is
Carter is liable to Class 2,, but not Class 4 for 2011/12

Can anyone explain how they get this answer - we have not covered NI in class - so I am fumbling through it on my own.

Many thanks.


  • Diddy Mau
    Diddy Mau Registered Posts: 238 🎆 🐘 🎆

    Off the top of my head. there is a limit you need to earn before you pay NI class 4. think its about £5176.
    I will check my notes tonight and let you know
  • MarieNoelle
    MarieNoelle Moderator, MAAT, AAT Licensed Accountant Posts: 1,369
    Hi anniebabe,

    This part is covered in the Osborne book:

    Self-employed individuals are liable to Class 2 and Class 4 NIC
    - class 2 NIC is a flat rate amount (£2.50 a week)
    - class 4 is payable on assessable trading profits above £7225 per year (9% between £7225 and £42475 - 2% above £42475)

    Self-employed individuals may also claim a "small earnings exception" if profits are below £5315 in which case class 2 NIC need not be paid - but this is not mentioned in your answer.

    I hope this is clearer,
  • anniebabe
    anniebabe Registered Posts: 595
    Hi, No sorry - not making sense to me - which figures should i be working from - accounting profit or taxable profit?
  • MarieNoelle
    MarieNoelle Moderator, MAAT, AAT Licensed Accountant Posts: 1,369
    Taxable profits :001_smile:
  • anniebabe
    anniebabe Registered Posts: 595
    okie dokie - will have another look at that question shortly - I dont seem to be getting into the swing of things with this unit for some reason.
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