MrAnchovy
18-02-2011, 12:24 PM
There have been a number of questions here recently (and I have received some PMs) about paying Class 2 NI so I thought it would be useful to explain the situation.
Class 2 National Insurance is payable by the self employed (including childminders) at a fixed rate of £2.40 a week (£2.50 from April 2011) - a total of £125 a year (£130 for 2010/11).
If your earnings from self-employment are more than £5,075 a year (£5,315 in 2011/12), you must pay these contributions. If your earnings are less than that you can claim a Small Earnings Exception which means you do not have to pay Class 2 NI. But this is not usually worth it because the saving is small and you will stop accruing eligibility for the following benefits:
Maternity Allowance (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Expectingorbringingupchildren/DG_10018869)
Basic State Pension (http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/index.htm)
Contribution-based Employment and Support Allowance (http://www.direct.gov.uk/en/DisabledPeople/FinancialSupport/esa/index.htm)
Bereavement Allowance (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Bereaved/DG_10018684) or Widowed Parents Allowance (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Bereaved/DG_10018848) for your husband, wife or civil partner
This means that it is unlikely to make sense claiming the exception except in the following circumstances:
You are also employed in a job which pays more than the Lower Earnings Limit of £97 a week (£102 in 2011/12) - in this case you will be credited with Class 1 National Insurance contributions (even if you don't actually pay any because you earn less than what is now called the Primary Threshold of £110 a week - £139 in 2011/12) which will qualify you for Statutory Maternity Pay instead of Maternity Allowance and give you entitlement to the other benifits mentioned above
or ALL of the following apply:
EITHER you have already qualified for the full Basic State Pension by achieving at least 30 qualifying years (or a reduced number of qualifying years which may apply in certain circumstances) - you can check this by getting a State Pension forecast (http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/StatePensionforecast/DG_10014008)
OR you will be credited as paying National Insurance contributions for the current year because you are receiving Carer's Allowance or Working Tax Credit or in certain other circumstances (http://www.pensionsadvisoryservice.org.uk/state-pensions/national-insurance-credits)
You are not going to become pregnant
If you become ill or disabled you will qualify for the means tested Income Based Employment and Support Allowance
You do not have a husband, wife or civil partner that will qualify for Bereavement Allowance or Widowed Parents Allowance if you die
Class 2 National Insurance is payable by the self employed (including childminders) at a fixed rate of £2.40 a week (£2.50 from April 2011) - a total of £125 a year (£130 for 2010/11).
If your earnings from self-employment are more than £5,075 a year (£5,315 in 2011/12), you must pay these contributions. If your earnings are less than that you can claim a Small Earnings Exception which means you do not have to pay Class 2 NI. But this is not usually worth it because the saving is small and you will stop accruing eligibility for the following benefits:
Maternity Allowance (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Expectingorbringingupchildren/DG_10018869)
Basic State Pension (http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/index.htm)
Contribution-based Employment and Support Allowance (http://www.direct.gov.uk/en/DisabledPeople/FinancialSupport/esa/index.htm)
Bereavement Allowance (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Bereaved/DG_10018684) or Widowed Parents Allowance (http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Bereaved/DG_10018848) for your husband, wife or civil partner
This means that it is unlikely to make sense claiming the exception except in the following circumstances:
You are also employed in a job which pays more than the Lower Earnings Limit of £97 a week (£102 in 2011/12) - in this case you will be credited with Class 1 National Insurance contributions (even if you don't actually pay any because you earn less than what is now called the Primary Threshold of £110 a week - £139 in 2011/12) which will qualify you for Statutory Maternity Pay instead of Maternity Allowance and give you entitlement to the other benifits mentioned above
or ALL of the following apply:
EITHER you have already qualified for the full Basic State Pension by achieving at least 30 qualifying years (or a reduced number of qualifying years which may apply in certain circumstances) - you can check this by getting a State Pension forecast (http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/StatePensionforecast/DG_10014008)
OR you will be credited as paying National Insurance contributions for the current year because you are receiving Carer's Allowance or Working Tax Credit or in certain other circumstances (http://www.pensionsadvisoryservice.org.uk/state-pensions/national-insurance-credits)
You are not going to become pregnant
If you become ill or disabled you will qualify for the means tested Income Based Employment and Support Allowance
You do not have a husband, wife or civil partner that will qualify for Bereavement Allowance or Widowed Parents Allowance if you die