PART 10INCOME AND CAPITAL

CHAPTER 4Self-employed earners

Deduction of tax and contributions for self-employed earnersI199

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 F1... 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 200798 (personal allowances) 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 F2basic 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

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, (3) of the Contributions and Benefits Act99 at the rate applicable at the date of claim except where the claimant’s chargeable income is less than the amount specified in subsection (4) of that section (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 Act100 (Class 4 contributions recoverable under the Income Taxes 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 regulation 98(3)(a) or (4), as the case may be;

b

in the case of employment as a child minder, one third of the earnings of that employment.