Question on NI contributions and tax

[cassa333]

Hello,

Can anyone tell me what is the maximum you can earn befor you have to pay NI contributions and would it be the same if you got say �2500 once a year or �50 a month?

Also if you are not employed but earn money (well below the tax threshold) do you have to declare it if you are not in receipt of any benifits?

Or would you have to fill out a tax return and say you earnt �2500?

Thanks

[terambulan]

The first �89pw is free of tax. Anything above that is taxable.

[cassa333]

Thank you. Is that both tax and insurance?

[buildersmate]

The two figures are different and unlinked.
The single personal tax allowances is currently �5525, or �100.48p per week.
The lower earnings limit for NI is �87 per week.
The tax is calculated over the year, so if you earn less for a period of time, you get the 'credit' later in the year.
The NI is more complicated - it depends if you are paid weekly or monthly - if you exceed the threshold (of �87 on a weekly basis) in any pay period, you pay NI on ALL the income in THAT period. But if you earned less than the threshold in any period, you pay no NI. Except if you are a Director of the company, when different rules apply. This is presumably to prevent directors of their own companies paying themselves little one month and much more the next, and hence avoiding some NI.
Details here
http://www.hmrc.gov.uk/rates/nic.htm
http://www.hmrc.gov.uk/rates/it.htm

[buildersmate]

Sorry - picked up the wrong year's figures - the figures in the weblink Tables are correct - quite why HMRC continue to quote last year's (2007-8) figures on their website beats me.

[TCL-MUMPING]

I think buildersmate is getting confused about the rates. The figure of �87 per week is the Lower Earnings Limit (LEL) rate for 2007-8 but it's not the figure above which NI is paid. The LEL is used for State Benefits and it's the figure at which NI is treated as if it were paid. This years LEL is �90 but NI is not deducted until you earn above �110 and 11% is deducted only from the amount ABOVE it, not the whole amount.

[buildersmate]

I stand corrected, Corby. Sorry about the mistake.