Class 4 contribution at 9% instead of 2%

[bethanyanne90]

Hi,

I have earned 106k from my PAYE Job and 18.5k from Self Employement, sacrificed 25k into SIPP (20k x 1.25) and I am doing my self assessment. It is the first time I have a combined PAYE + sole trader income.

1st Question I am asked to pay Class 4 NIC on 6k ( I assume the difference between soletrader income and 12.5k) on 9%, should it not be 2% as I maximised my NIC ceiling with my PAYE job?

1. When I was planning during the year I basically figured that if I put more money in my SIPP than I get from my self employement I could discount that as it reduces my taxable income. Was I wrong and are there other hidden taxes, as they ask me to pay around 2k more than my calculation?
2. Am I better off switch to Ltd. Co. instead of sole trader? I do not have major expenses, it's just services
3. Basically after adding both incomes and taking out SIPP I am left with 99k. Am I right to go and input this in the take home calculator and pay the amount of tax that is there (+2% Class 4 NIC of 6k which is £120) at the moment the Self assessment is asking me to pay 2k more than that figure

 

[lookingforhelp96]

@bethanyanne90 1) Self-assessment doesn't calculate this (useful right?). You need to pay and claim a NI refund through HMRC's website. Google "annual maxima"

1 again) Not enough information given but no hidden taxes. NI would still be due.

It's more likely to do with the fact you've got a 1257L tax code. Is it your first year over £100k?

2) Probably not. Not much benefit these days.

 

[bethanyanne90]

@lookingforhelp96 Thank you for your reply! It is my 3rd year over 100k and my first as sole trader as well as PAYE.

Looking back at last year self assessment (PAYE details were automatically imported) I think I should wait until the p60 is released because then my PAYE taxes are automatically added as opposed to me manual inputing them, which should help with NI calculations, if not I will get an accountant.

 

[lookingforhelp96]

@bethanyanne90 It won't help with the NI. For some reason, HMRC require a separate claim for a refund:

https://www.gov.uk/claim-national-insurance-refund

The annual maxima calculation you will need to do first (bottom):

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim01625

 

[bethanyanne90]

@lookingforhelp96 a bit rubbish that the self assesment calculator does not finish the job and makes ask for a refund after.

 

[godsgirl]

@bethanyanne90 I think it's supposed to do the calculation, but it takes a while for the record of your Class 1 contributions for the year to get to the right place in their system. If you submit your tax return too soon then it doesn't yet know that you've made Class 1 contributions, so your Class 4 figure doesn't get adjusted.