National Insurance & Your Private Practice – What You Need to Know
As a private healthcare practitioner, there may be several ways that you come across National Insurance. This quick guide will help you work out what it means, and where to find more information.
National Insurance as an employee
You’ve probably already come across National Insurance if you’ve ever been employed. Class 1 National Insurance contributions are deducted at source from employees’ pay, and your employer also pays an additional sum called ‘employer’s contributions’ for you. It’s all pretty simple when you’re employed, so there’s no need to think too much about it.
National Insurance if you’re self-employed
As a private healthcare practitioner, you may be self-employed. In which case, you are responsible for your own National Insurance. You need to tell HM Revenue and Customs (HMRC) and register for National Insurance within three months of first becoming self-employed, even if you don’t earn enough in that first year to need to pay tax.
When you’re self-employed, there are two forms of National Insurance contributions which you have to pay:
- Class 2 contributions are paid at a standard rate, regardless of your annual income. In 2014–15, the rate is £2.75 per week, unless you earn less than £5,885, and you have applied for and got a small earnings exemption. From next tax year, these contributions will be dealt with alongside your annual tax return, although at the moment, you have to make your own arrangements to pay them.
- Class 4 contributions depend on your annual profit. In tax year 2014–15, you pay 9% of any profits above £7,956 and below £41,865, and 2% of anything above that. You can normally pay Class 4 National Insurance after you have completed your tax return, because it’s calculated on the basis of your profits.
If you’re both employed and self-employed, as many healthcare practitioners are, your employer will deduct Class 1 National Insurance from your employment pay, but you will be responsible for Class 2 and 4 on your self-employed income.
There is more about National Insurance contributions here.
National Insurance as an employer
You might also need to know about National Insurance as an employer. If you employ staff, whether just a single secretary or PA, or a full team of therapists, you’ll need to deduct their National Insurance contributions from their income at source. You’ll also need to pay employers’ contributions. The rates for both depend on the employee’s category, which is provided by HMRC, and also on what they earn. There is more information about rates of National Insurance and employment categories here.
At the moment, you can also claim Employment Allowance, giving you up to £2,000 off your National Insurance bill if you’re an employer.
Our Medstars top tip on all this is: if in doubt about your national insurance obligations, seek advice. There is plenty of information on the www.gov.uk website, and HMRC also has a helpline for newly self-employed people on 0300 200 3504. It’s complicated, but there’s plenty of help available.