National Insurance Deductions from CIS Tax Rebate. CIS subcontractors are required to pay Class 2 and 4 national insurance contributions on their profits.
There are two type of National Insurance contributions:
- Class 2, if your profits are £6,515 or more a year
- Class 4, if your profits are £9,569 or more a year
The NI rates for 2021/22 are:
- Class 2: 3.05 per week
- Class 4: 9% on profits between £9,569 and £50,270 and 2% on profits over £50,270
The final CIS tax rebate is calculated after deducting:
- Class 2 NI
- Class 4 NI
- Income tax
from the CIS tax deducted at source from the subcontractor's earnings.
When do you have to pay Class 2 National Insurance
You pay Class 2 NI when your trading profit is greater than the Class 2 threshold stated above.
However, class 2 National Insurance contributions are required to prevent gaps in your national insurance records.
Gaps in Class 2 NI contributions may mean you will not have enough years of National Insurance contributions to either:
- get the full State Pension, or
- qualify for some benefits
You can view your National Insurance contributions records on your government gateway account. If you think your National Insurance record is wrong, contract HMRC.
When do you have to pay Class 4 National Insurance
You need to pay Class 4 NI if your taxable profits are above the lower Class 4 profit limit of £9,568 for 2021/22.
The Class 4 NI rates are currently 9% on profits over this limit. However, if your profits are above the higher limit of £50,270 in 2021-22 then the higher rate Class 4 NI is 2% on profits over the higher limit.
National Insurance Deductions from CIS Tax Rebate
Canalitix Accountants are authorised by HMRC to act as Self Assessment tax agents and would welcome the opportunity to assist with your tax return.