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Class 2 NI Contributions and ESA entitlement

vandermist63
Posts: 4 Newbie
Poor health has stopped me from working full time, so I get about £4k from my job, so pay no NI on that, and another £2k from self-employed work. I pay voluntary class 2 contributions on that in order to cover myself – which I thought would entitle me to claim ESA if my health ever got to the point where I had to stop work altogether. But looking at the rules I think it’s saying that to qualify, not only must you have paid 2 full years NI (which I have done) but also you must ‘have paid (or be treated as having paid) contributions on earnings of at least 50 times the lower earnings limit’ (ie paid NI on earnings about £4k per year).
So .. does the fact that I have only paid my NI on my self-employed earnings of £2k mean that I’m not entitled ??
I guess I’ll find out when I put in a claim – but it would be really helpful if anyone can tell me whether I’ve understood the rules correctly ?
thanks
So .. does the fact that I have only paid my NI on my self-employed earnings of £2k mean that I’m not entitled ??
I guess I’ll find out when I put in a claim – but it would be really helpful if anyone can tell me whether I’ve understood the rules correctly ?
thanks
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Comments
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AFAIK class 2 only gets you a state pension0
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I believe that you have to pay class 2 and class 4 to be able to claim ESAmake the most of it, we are only here for the weekend.
and we will never, ever return.0 -
You need to have paid class 1 or class 2 for only one of the 2 tax years 9/10 & 10/11 and have NIable earnings in that tax year to a value of 26 x LEL
which means
9/10 = £2470
10/11 = £2522
You also need to have NI payable earnings for both tax years equivalent to 50 weeks LEL.... which means
NI payable earnings for tax year 9/10 of £4750 or more and
NI payable earnings for tax year 10/11 of £4850 or more
Or NI credited weeks (upto 50) which you get whilst claiming benefits.
An employed person can see their total NIable earnings on their P60, don't know how a self employed person would do this.
You do not need to have 2 full years of NI. And as far as I know, you can also satisfy the 26xLEL with less than 26weeks work, what matters is how much you earned.
If you satisfy the 50 x LEL for both tax years, then if you are put on ESA(C) WRAG it will last for 365 days only, but you can qualify again after waiting more than 12 weeks and then reapplying using tax years 10/11 & 11/12
You will qualify for tax year 11/12 if you have NIable earnings in tax year 11/12 of 50 times LEL...
You can then do the same again and get a third 365 days by waiting 12 weeks and then claiming again using tax years 11/12 & 12/13 You will qualify for tax year 12/13 by using your NIable earnings since April 2012 and using your weeks that you were on ESA for the rest of this (current) tax year - which is why it is important to claim as soon as you have stopped work/stopped paying your NI .
Basically as you probably have not claimed any benefits in the tax years 9/10 & 10/11 ..... You have to satisfy the
NI payable earnings for tax year 9/10 of £4750 or more and
NI payable earnings for tax year 10/11 of £4850 or more
conditions and if you can do that as far as I can tell, you will automatically satisfy the 26xLEL condition for both tax years.0 -
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Researching this as an exercise (I'm not acquainted with any of this law!)...
Welfare Reform Act 2007 Sched.1 Part.I para.2:(1) The second condition is that—
(a) the claimant has in respect of the last two complete tax years before the beginning of the relevant benefit year either paid or been credited with Class 1 or Class 2 contributions or been credited with earnings, and
(b) the earnings factor derived as mentioned in sub-paragraph (2) must be not less in each of those years than the year's lower earnings limit multiplied by 50.
(2) The earnings factor referred to in sub-paragraph (1)(b) is the aggregate of the claimant's earnings factors derived—
(a) from so much of his earnings as did not exceed the upper earnings limit for the year and upon which primary Class 1 contributions have been paid or treated as paid or from earnings credited, and
(b) from Class 2 contributions.(1) For the purposes of paragraphs 1 and 2—(b) “Class 1 contributions”, “Class 2 contributions” and “primary Class 1 contributions” have the same meaning as in the Contributions and Benefits Act (see section 1 of that Act);
(d) “earnings factor” shall be construed in accordance with sections 22 and 23 of that Act;(1) A person shall, for the purposes specified in subsection (2) below, be treated as having annual earnings factors derived—
(a) in the case of 1987-88 or any subsequent tax year, from [so much of his earnings as did not exceed the upper earnings limit and] upon which primary Class 1 contributions have been paid or treated as paid and from Class 2 and Class 3 contributions;(1) Earnings factors derived as mentioned in section [22(1)] above, including earnings factors as increased by any order under section 148 of the Administration Act—
[...]
(b) shall be made ascertainable from tables or rules to be drawn up by the Secretary of State and embodied in regulations.
(3) The tables and rules referred to in subsection (1) above shall be drawn up so that, in general—
[...]
(b) any number of Class 2 or Class 3 contributions in respect of a tax year gives rise to an earnings factor for that tax year equal or approximating to that year's lower earnings limit for Class 1 contributions multiplied by the number of contributions.
Someone with experience may be able to show me that I've misread this, though.0 -
This implies to me that your earnings factor relevant for contributory entitlement is based on the number of Class 2 contributions, each of which is regarded as earnings at the Class 1 lower earning limit.
Someone with experience may be able to show me that I've misread this, though.
I would agree with that. So for employed class 1 it's not the number of weeks but the amount earned, for self employed class 2 it's not the amount earned but the number of weeks paid.
It would seem.0 -
tagq2 and epitome: thanks for all your research!
tagq2 you seem to have tracked down the key piece of info: "any number of Class 2 or Class 3 contributions in respect of a tax year gives rise to an earnings factor for that tax year equal or approximating to that year's lower earnings limit for Class 1 contributions multiplied by the number of contributions" certainly makes it sound as if what matters is how much NI I've paid, not how much I earned.
The fact that everyone else is as unsure as me does at least confirm that the legislation is quite confusing!
I really appreciate everyone's input0
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