What is income tax? #StartUps - The Entrepreneurial Way with A.I.


Thursday, February 6, 2020

What is income tax? #StartUps

National insurance

National Insurance is another tax paid on employment income and self-employed profits. The key difference is that national insurance is very closely tied to state benefits, and is paid by both employees and employers.

Essentially, the idea is that national insurance is paid into a fund, and this fund then pays for some state benefits. Consequently, if you haven’t made enough national insurance payments, you may be barred from receiving some state benefits.

For most people, national insurance is simply deducted from their pay slip. However, if you’re self-employed, you’ll need to work out how much you need to pay as part of your self-assessment tax return.

Employers should ensure that they make the correct contributions for their employees, and make the correct deductions for their pay.

National insurance contributions are paid by those aged over 16 who fulfil one of the following criteria:

  • Employed and earning over £166 a week (if you earn between £118 and £166 a week, you do not need to pay, but you are counted as having paid in terms of eligibility for benefits).
  • Self-employed and making an annual profit of £6,365 or more (if you make less than this, you may be able to make voluntary contributions).

For more information, including a full explanation of the rates of national insurance that need to be paid by self-employed people, employees, and employers, see the gov.uk national insurance page.

via https://www.AiUpNow.com/ by Alec Hawley, Khareem Sudlow