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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

aly
18-02-2011, 12:59 PM
I thought your earning had to be under a different amount..{£2000+}?? Don't know where I got the figure mind lol..

TammyN
18-02-2011, 12:59 PM
:thumbsup: Thanx for clearing this up, it has been on my mind as im getting conflicting advice but have now decided to carry on paying as normal, good job as my 1st years bill has turned up this morning :-)

sarah707
18-02-2011, 02:11 PM
Women bringing up children at home may in the past have applied for Home Responsibilities Protection (HRP).

This has been scrapped by the new Govt -

http://www.pensionsadvisoryservice.org.uk/state-pensions/home-responsibilities-protection-%28hrp%29

HRP has been replaced with a pension credit -

http://www.pensionsadvisoryservice.org.uk/state-pensions/national-insurance-credits

You are also eligible for support if you receive Carers Allowance and some other benefits because you look after someone with a disability.

Your pension will be topped up by your husband's contributions if you are married and he paid NI. If you divorce you are still eligible to claim on his contributions for the time you were married.

Contact NI for more information.

:D

carolyn01
18-02-2011, 02:33 PM
Thank you for clearing that up for us, I too will continue with my payments then.

Carolyn

MrAnchovy
18-02-2011, 05:31 PM
Your pension will be topped up by your husband's contributions if you are married and he paid NI.
This is not correct.

Your husband's contributions do not count towards you qualifying for the full Basic Pension, although they may count towards a category B state pension, however, you have to wait until he has reached 65 and starts to draw his pension. The maximum pension that you can get on this basis is approximately 60% of your husband's basic pension.

The points on pension credits for Carer's allowance and the possible reduction in qualifying years due to HRP may be relevant for some people, and I have edited my original post accordingly: thanks for this improvement.

I have also edited it to make the main point, that it is usually worth not claiming the exemption, earlier in the post.

sarah707
19-02-2011, 09:10 AM
This is not correct.

Your husband's contributions do not count towards you qualifying for the full Basic Pension, although they may count towards a category B state pension, however, you have to wait until he has reached 65 and starts to draw his pension. The maximum pension that you can get on this basis is approximately 60% of your husband's basic pension.

Then please explain how I get pension credit based on my ex-husband's contributions at a time when I was not working and he was.

I have a pension forecast to show this.

It was explained to me that if I re-marry I will lose them but I can still use my new husband's credits if he was working and paying NI contributions through the time I was not.

I would recommend that everyone applies for a pension forecast especially if you are over 45 / 50 to check where your contributions are leading.

You might find it helpful to top them up... although we are not unfortunately talking about huge amounts of final pension and the age keeps getting put back and put back :(

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/StatePensionforecast/DG_10014008

:D

MrAnchovy
19-02-2011, 12:06 PM
Then please explain how I get pension credit based on my ex-husband's contributions at a time when I was not working and he was.


First of all we need to stop referring to Pension Credit (http://www.direct.gov.uk/en/moneytaxandbenefits/benefitstaxcreditsandothersupport/on_a_low_income/dg_10018692), which is a means-tested benefit that does not depend on NI contributions (unless that is actually what you mean?).

I don't know all the details of your situation and I have not seen your pension forecast which will have been produced taking all those details into account, so I don't know why it says what it does.

However the rules on accruing qualifying years have changed significantly over the years, notably in April 2010, and the information I have provided refers to the current situation: your pension forecast will of course be based on the way it worked in the past (as changes are never retrospective).

Could it be that your pension forecast is showing that you qualify for the category B pension based on your husband's qualifying years?

I agree as I indicated in my original post that before you do anything that may affect your entitlement to state retirement benefits, you should get a state pension forecast.

sarah707
19-02-2011, 04:32 PM
Thank you for your reply.

I am sure you know more about the subject than me. :D