National Insurance exemption

Class 4 NIC
You will have to fill out a self-assessment form if you pay Class 4 NIC. This also applies for income tax, which is also self-assessed. The relevant forms are available from the tax office, but simply stated there are two ways to do this under self-assessment:

• You can fill out the forms and have the tax office assess your tax and NIC for you in September, or

• You can calculate them yourself and send them to the tax office in January.

The rate for payment for year 05-06 of Class 4 NIC is 8% between £4,895 and £32,760, plus 1% of the excess over £32,760.

You must pay Class 4 NIC on profits & enterprise allowance. Pay does not include:

• Losses;

• Personal tax allowances;

• Pension funds;

• Superannuation; and

• Retirement annuity

Note: If a husband and wife are both self-employed, their Class 4 NIC liabilities are separate.

Class 4 NIC exemptions

You are exempt from Class 4 NIC if you are:

• Outside the UK for the year of assessment;

• A sleeping partner;

• A trustee;

• A diver (there are specific regulations that apply to off-shore divers and diving instructors)

• Over 65/60.

If you are employed and self-employed then you may have to pay Class 1, 2 and 4 NIC.