Self Employed - small earnings certificate.

builderken · 24 September 2009 at 5:03PM

I have been self employed for over 4 years. I was earning very little so I applied for a small earnings exemption certificate. (ie for class 2 NI) I am now off work with a torn ligament. I applied for sickness benefit but have been told I am not entitled as I have not paid enough class 2 contributions. I have been working for 46 years - paid 42 years class 4 - paid a year class 2 then was exempt. Why am I not entitled to sickness benefit ?

stazi · 24 September 2009 at 6:26PM

You are not entitled to ESA becasue you have not paid any/enough Class 2 NIC in the relevant tax years 06/07 and 07/08. The SEE is just that- because of your low earnings/profits, HMRC say you don't have to pay any NIC- but HMRC don't pay your stamp or credit your NI records either.

The NIC system is just like any other insurance policy- if you don't pay in- you don't get out. The SEE as you have now found out, is false economy.

Class 4 NIC is just a tax on your S/E profits, and doesn't go towards any benefit.

When/if you return to S/E, dump the SEE and pay the Class 2 NIC. If you are able, ask HMRC if you can cancel the SEE for these tax years and pay the Class 2 NIC. The NIC for these tax years would now be 'late'.

builderken · 27 September 2009 at 8:07AM

Thanks - I wish it had been explained to me before I applied for the SEE. I have contacted NI and applied to pay the lost year.

chrisbur · 27 September 2009 at 12:02PM

builderken wrote: »

Thanks - I wish it had been explained to me before I applied for the SEE. I have contacted NI and applied to pay the lost year.

The form you use to apply for the exemption warns of this, the following quote is almost at the beginning of the form:-
"Why pay Class 2 contributions?

Class 2 contributions count towards:
• Incapacity Benefit/Employment and Support Allowance
• basic State Pension
• bereavement benefits
• Maternity Allowance.
If you are only liable for Class 2 contributions, you should
consider your position carefully before applying for a
Certificate of Small Earnings Exception.
If you apply for and are granted exception from
National Insurance contributions, you may lose your

entitlement to benefits by not paying Class 2 contributions."

If you can only make up missing payments with class 3 contributions check what they cover for as from memory I believe that they only count towards pension entitlement.

Self Employed - small earnings certificate.

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