National Insurance Matters

If a spouse is employed by the family business it is probably worth paying earnings in 2007/08 of between £87 (the lower earnings limit) and £100 (the earnings threshold) per week. There will be no employer’s or employee’s contributions due on the earnings but entitlement to a state retirement pension and certain other benefits is preserved. Note that the thresholds will be £90 and £105 per week respectively in 2008/09.

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A PAYE scheme would be needed to establish the employee’s entitlement to benefits.

For the self-employed there is a requirement to pay a flat rate contribution (Class 2). If your profits are low you can apply for exemption. The limit for 2007/08 is £4,635. If contributions have been paid for 2007/08 and it subsequently turns out that earnings are below £4,635 a claim for repayment of contributions can be made. The deadline for this claim is 31 December 2008.

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On the other hand as the contributions are only £2.20 a week, it may be advisable to pay the contributions in any event in order to maintain a contributions record. The alternative voluntary Class 3 contributions are £5.60 a week higher.

All employers with at least 50 employees must file their end of year returns electronically. Employers with fewer than 50 employees do not have to start online filing until 2009/10 but there are tax-free incentives for early take up. Large employers (those with at least 250 employees) must also pay their PAYE electronically.

Talk to us if you are interested in using a PAYE settlement agreement to account for the tax due on minor employee benefits. It can reduce administrative hassle and save time!

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National Insurance Matters

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