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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: income from employment

Anna, a worker, is treated as self-employed by Zed Ltd, but HMRC successfully argues she is an employee. Which consequence follows for Zed Ltd under the NIC rates in the tax tables?

Zed Ltd becomes liable to employer Class 1 NIC at 15% on Anna's earnings above £5,000 a year. Class 4 is a self-employed charge and Class 1A applies to benefits, while the employment allowance only offsets liability up to £10,500.

  1. AZed Ltd becomes liable to employer Class 1 NIC at 15% on her earnings above £5,000 a yearCorrect
  2. BZed Ltd becomes liable to Class 4 NIC on her earnings
  3. CZed Ltd pays no NIC because the employment allowance removes all liability for every employer
  4. DZed Ltd pays Class 1A at 15% on her entire pay

Explanation

An employee's earnings attract employer Class 1 at 15% above £5,000. Class 4 is paid by self-employed individuals, and Class 1A relates to benefits. The employment allowance of £10,500 only offsets liability, subject to eligibility, and does not remove it entirely.

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