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How do Your CIS Contractors Pay National Insurance?


National Insurance is a cost that self-employed contractors have to consider, so as a recruiter you may find yourself fielding questions about how CIS contractors pay national insurance. In this article we’ll cover all the basic information you’ll need to advise your contractors.

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Class 1 National Insurance applies to employees, and does not apply to self-employed contractors. However, your CIS contractors will have to pay class 2 and class 4 National Insurance Contributions (NICs).

When they register as self-employed, the registration covers both income tax and national insurance.

Class 2 National Insurance

Class 2 NICs are a fixed amount of £3.00 per week (2019/20), assuming the contractor’s profits are over the threshold of £6,365 (2019/20). The amount due is based on the number of weeks the contractor is self-employed in the tax year. For example, if their self-employment starts on the 1st of February, they’ll need to pay 9 weeks of class 2 national insurance, which would be £27.00.

Class 4 National Insurance

Class 4 NICs are based on the contractor’s profits from their self-employed work. In tax year 2019/20, they pay no class 4 NICs on profits up to £8,632, 9% from £8,632 to £50,000 and 2% on profits over £50,000.

When and how do CIS contractors pay NICs?

Both class 2 and class 4 NICs are now calculated and paid through self-assessment, which means your contractors no longer need to make separate weekly payments for class 2 NICs.

Payment is due on the 31th of January, which is also the deadline for submitting self-assessment tax returns.

Through the CIS scheme, 20% will be deducted from your contractors’ payments before payment is made to them (this is 30% before they’ve registered as self-employed). These deductions function as an advance payment against their income tax and NICs. Once their self-assessment tax return has been calculated and submitted, they will either have an additional payment to make, or they’ll receive a refund.

If your CIS contractors need help with their self-assessment tax return

If your contractors ask you about their self-assessment tax return, it’s usually best to refer them to an expert who can advise them based on their specific circumstances. For example, Orange Genie’s specialist contractor accountants will be happy to prepare and submit their tax return for them, and special discounts are available for contractors using Orange Genie’s CIS solution.

If you have any questions or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.


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