Deduction of tax and contributions for self-employed earners
62.—(1) Subject to paragraph (2), the amount to be deducted in respect of income tax under regulation 61(1)(b)(i), (3)(b)(i) or (9)(a)(i) (calculation of net profit of self-employed earners) is to be calculated—
(a)on the basis of the amount of chargeable income; and
(b)as if that income were assessable to income tax at the basic rate of tax less only the personal allowance to which the claimant is entitled sections 35 and 38 to 40 of the Income Tax Act 2007 (personal reliefs)(1) as is appropriate to their circumstances.
(2) If the period determined under regulation 55 is less than a year, the earnings to which the basic rate of tax is to be applied and the amount of the personal allowance deductible under paragraph (1) is to be calculated on a pro rata basis.
(3) Subject to paragraph (4), the amount to be deducted in respect of national insurance contributions under regulation 61(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(2) or, as the case may be, 11(8)(2) of the Benefits Act 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 profits threshold) for the tax year in which the date of claim falls; and
(b)the amount of Class 4 contributions (if any) which would be payable under section 15 of that Act (Class 4 contributions recoverable under the Income Tax Acts)(3) 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.
(4) If the period determined under regulation 55 is less than a year—
(a)the amount specified for the tax year referred to in paragraph (3)(a) is to be reduced pro rata; and
(b)the limits referred to in paragraph (3)(b) are to be reduced pro rata.
(5) In this regulation “chargeable income” means—
(a)except where sub-paragraph (b) applies, the earnings derived from the employment less any expenses deducted under regulation 61(3)(a) or, as the case may be, (4);
(b)in the case of employment as a child minder, one-third of the earnings of that employment.
2007 c.3; section 35 was amended by section 4 of the Finance Act 2009 (c. 10) and sections 3 and 4 of the Finance Act 2012 (c.14). Section 38 was amended by S.I. 2011/2926. Section 40 was amended by paragraph 55 of Schedule 9 to the Finance Act 2008 (c. 9)
Section 11 was substituted by paragraph 12 of Schedule 1 to the National Insurance Contributions Act 2015 (c. 5)
Section 15 was amended by section 13 of the Limited Liability Partnerships Act 2000 (c. 12), section 3(2) of and Schedule 2 to the National Insurance Contributions Act 2002 (c. 19), paragraph 424 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5), Article 4 of S.I. 2011/938 and Article 4 of S.I. 2012/807