Deduction of tax and contributions for self-employed earners
99.—(1) Subject to paragraph (2), the amount to be deducted in respect of income tax under regulation 98(1)(b)(i), (3)(b)(i) or (9)(a)(i) (calculation of net profit of self-employed earners) is to be calculated on the basis of the amount of chargeable income and as if that income were assessable to income tax at the starting rate or, as the case may be, the starting rate and the basic rate of tax less only the personal allowance to which the claimant is entitled under sections 35 and 38 to 40 of the Income Tax Act 2007(1) (personal reliefs) as is appropriate to the claimant’s circumstances.
(2) If the period determined under regulation 92 is less than a year the earnings to which the starting rate of tax is to be applied and the amount of the personal reliefs deductible under paragraph (1) is to be calculated on a pro rata basis.
(3) The amount to be deducted in respect of National Insurance contributions under regulation 98(1)(b)(i), (3)(b)(ii) or (9)(a)(ii) is to be the total of—
(a)the amount of Class 2 contributions payable under section 11(1) or, as the case may be, 11(3) of the Contributions and Benefits Act(2) at the rate applicable at the date of claim except where the claimant’s chargeable income is less than the amount specified in section 11(4) of that Act (small earnings exception) for the tax year in which the date of claim falls; but if the assessment period is less than a year, the amount specified for that tax year is to be reduced pro rata; and
(b)the amount of Class 4 contributions (if any) which would be payable under section 15 of that Act(3) (Class 4 contributions recoverable under the Income Tax Acts) at the percentage rate applicable at the date of claim on so much of the chargeable income as exceeds the lower limit but does not exceed the upper limit of profits and gains applicable for the tax year in which the date of claim falls; but if the assessment period is less than a year, those limits are to be reduced pro rata.
(4) In this regulation “chargeable income” means—
(a)except where sub-paragraph (b) applies, the earnings derived from the employment less any expenses deducted under paragraph (3)(a) or, as the case may be, (4) of regulation 98;
(b)in the case of employment as a child minder, one-third of the earnings of that employment.
Section 11 was amended by the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2), section 2 and paragraph 12 of Schedule 3 and S.I. 2007/1052, article 2(b).
Section 15 was amended by the Income Tax (Trading and Other Income) Act 2005 (c. 5), sections 882(1) and 884 and paragraphs 419 and 420(1), (2)(a), (c) and (d), (3) and (4) of Schedule 1 and Schedule 3, the National Insurance Contributions Act 2002 (c. 19), section 3(1), the Limited Liability Partnerships Act 2000 (c. 12), section 13 and S.I. 2007/1052, article 4(a) and (b).