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Shona started in business on 1January 2022 as a soletrader and prepared her first set of accounts for the14 weeks to 5April 2022.Her taxable trading profit for that period was 10600
What are Shona’s total national insurance contributions forthetaxyear2021/22?
SOLUTION
£136Class 2 contributions 14* £3.05 43
Class4contributio£n(10600–9,568)*9% 93
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Total contributions 136Good day,Please i don’t understand why the threshold for the class 4 contribution annual threshold of 9568 was not apportioned since the taxable profit was for a period of 14 weeks
The profit of 10,600 was assessed in 21/22 and the threshold of 9568 is not pro-rata
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The reason why the Class 4 contribution annual threshold of £9,568 was not apportioned in this case is because the threshold applies to the entire tax year, which runs from 6 April to 5 April of the following year, regardless of when the business started trading.
I get your confusion about the class 4 contribution threshold not being apportioned for the 14-week period. Typically, the annual threshold is applied for the entire tax year, regardless of the length of the accounting period. So, in Shona’s case, the taxable profit of £10,600 falls above the annual threshold of £9,568, which means she’d be liable for class 4 contributions on the entire amount.
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