With less than a month to go before changes to National Insurance (NI) come into force, it seems that many people working in the entertainment industry have been asking the same two questions: am I affected and, if so, is there anything that I can or should do?
Before we address these questions, let’s get an overview of the legislation.
Dual status
Under the current system, those working in film, TV, theatre, radio and commercial production are treated as employed for NI purposes and self-employed for income tax purposes. This enables low-income earners to qualify for state benefits such as Jobseeker’s Allowance (JSA), which can offer vital income when between roles.
However, as of 6th April 2014, those working within the entertainment industry will be classed solely as self-employed.
The decision to repeal the dual status follows a public consultation by HMRC, in which an overwhelming number of respondents (99.1% of 11,814 people) voted in favour of a simplified tax system.
National Insurance refunds
Despite receiving a mixed response initially, it seems the reforms aren’t so bad after all. In fact, thousands of individuals working in the entertainment industry may be eligible to reclaim up to 100% of their Class 1 National Insurance contributions (NICs) from between 2008/09 and 2013/14.
For example, if your income in 2013/14 was £30,000 you will have paid £2,669.40 in Class 1 NICs over the course of the tax year (Class 1 NIC is calculated at 12% on gross income between £7,755 and £41,450).
However, should you have been treated as self-employed during this time, and the profit on your income was £20,000, then your National Insurance payment would have been just £1,102.05. This is because NICs for self-employed people are set at just 9% for those making annual profits of between £7,755 and £41,450.
Working out the difference between the two figures shows that the individual in the above scenario would be in line for a refund from the taxman of £1,567.35. Not bad, we’re sure you’ll agree!
Eligibility and how to claim
To see if you’re owed a National Insurance rebate, and for further help and advice on how to claim this back, contact ClearSky Accounting today on 0808 147 1780 or email team.entertainment@clearskybusiness.co.uk.