Changes to Class 2 NIC for self employed in low income?

stuckist

I have currently been on ESA for 5 years, unfortunately my health isn't going to get better any time soon and as my husband earns over the threshold I recieve no actually benefit payments from the DWP. I studied at art school and still do some painting when I can and I also have a blog. I would like to try being self employed and try and make a little income from both these areas if possible. I would expect my income to be very low especially in the next few years both because I am not sure either are very profitable and also my ongoing health issues prevent me from putting in the long hours that a successful start up requires. I guess I am talking about making a bit of extra money from a hobby maybe £2000 to £4000 a year max.

My issue is this, at present I could be self employed and pay £2.80 a week to ensure my eligability to state benefits like a pension. Given my likely small income £150 a year in NIC isn't too bad. However from what I am reading it seems that the government plan to abolish class 2 NIC and instead just have class 4 NIC which I belive is 9% of profits over about £8090 which as far as I am aware doesn't even cover you for all benefits.

The other option is to pay voluntary class 3 NIC which are £14.10 a week which would be £733 a year which is a huge jump and probably wouldn't leave enough left over to cover my costs and effectively makes self employment pointless for me.

It seems very unfair on people who can only make a low income due to poor health. I feel very sad and trapped now on ESA as I can't see how to make any kind of self employment work. I know also that I could lose my ESA at any time and that I am unable to cope with a normal job.

Please could you tell me if I have got all this right or if I am missing something that might make this easier for me so I can go self employed but still qualify for a full state pension when the time comes which will be in about 25 to 30 years for me.

Thank you!

Pennywise

stuckist wrote: »

However from what I am reading it seems that the government plan to abolish class 2 NIC and instead just have class 4 NIC which I belive is 9% of profits over about £8090 which as far as I am aware doesn't even cover you for all benefits.

Concentrate on the facts of what we have now rather than rely on idle speculation as to what may or may not happen.

Almost certainly, if Class 2 NICs are abolished, the rules and rates re Class 4 will change. If and when such changes are decided, then we'll all know the implications. Class 4 doesn't currently provide for any benefits at all, so rule changes would be inevitable!

It's also a fairly illogical plan to decide on if & when to commence self employment based only on tax/nic rules. That's letting the tax tail wag the dog. You should be working towards setting up a sustainable business, and once you have a valid business plan, you can then worry about the tax/nic. Tax and NIC will always change from year to year, so if you set up purely for tax/nic reasons, then you're business will always be at risk as those rules change.

HappyMJ

stuckist wrote: »

I have currently been on ESA for 5 years, unfortunately my health isn't going to get better any time soon and as my husband earns over the threshold I recieve no actually benefit payments from the DWP. I studied at art school and still do some painting when I can and I also have a blog. I would like to try being self employed and try and make a little income from both these areas if possible. I would expect my income to be very low especially in the next few years both because I am not sure either are very profitable and also my ongoing health issues prevent me from putting in the long hours that a successful start up requires. I guess I am talking about making a bit of extra money from a hobby maybe £2000 to £4000 a year max.

My issue is this, at present I could be self employed and pay £2.80 a week to ensure my eligability to state benefits like a pension. Given my likely small income £150 a year in NIC isn't too bad. However from what I am reading it seems that the government plan to abolish class 2 NIC and instead just have class 4 NIC which I belive is 9% of profits over about £8090 which as far as I am aware doesn't even cover you for all benefits.

The other option is to pay voluntary class 3 NIC which are £14.10 a week which would be £733 a year which is a huge jump and probably wouldn't leave enough left over to cover my costs and effectively makes self employment pointless for me.

It seems very unfair on people who can only make a low income due to poor health. I feel very sad and trapped now on ESA as I can't see how to make any kind of self employment work. I know also that I could lose my ESA at any time and that I am unable to cope with a normal job.

Please could you tell me if I have got all this right or if I am missing something that might make this easier for me so I can go self employed but still qualify for a full state pension when the time comes which will be in about 25 to 30 years for me.

Thank you!

You're missing something.

ESA is paid with National Insurance credits so you at the very least have 5 years of contributions plus whatever time you worked before you ceased work.

You do not need to be getting any money. You can have a credits-only claim.

stuckist

Happy MJ I am not sure I really understand what you are saying. I am on ESA but I don't recieve any money as my partner earns over the threshold for benefits.

I am asking about if I were to go self employed how much NIC I would have to pay after the rules change in 2018, if I am only earning a couple of thousand a year.

I don't understand what you mean by a credits only claim, I am on that now but even if I stay on ESA if I start to earn under permitted work I would still have to pay towards tax and NI.

stuckist

Pennywise, thank you for your reply. I do understand what you are saying and it is frustrating that what the rules are to be aren't clear. My issue is that I have a long term chronic health issue which prevents me from working a normal job. I have some talents I could prehaps make a little money from but to do so I need to register as self employed. I don't have a valid business plan, I want to be an artist selling my art, who know if anyone will buy it or how much I might make, or even how many days I'll be well enough to work on any given week.

It used to be possible for people with an illness to make a little money from a hobby and pay something towards the cost of a pension. Now it seems like if the only way to do it is if you are sure you can make thousands of pounds of profit every year if not then you either need to say on sickness benefit or get a normal job.

I just feel it is unfair on people who would like to do something but can't manage a normal job.

Pennywise

stuckist wrote: »

Now it seems like if the only way to do it is if you are sure you can make thousands of pounds of profit every year if not then you either need to say on sickness benefit or get a normal job.

Until the new rules are announced, no-one knows, not even those in government at such an early stage. They almost certainly won't be introduced immediately either - things change very slowly these days. There'll be a period of consultation during which lots of different implications and side-effects will be highlighted and addressed. Even after it's in force, there'll almost certainly be tweaks to the new regime when unforeseen issues arise.

You'd be far better just getting on with starting the business and concentrating your energies on making it a success.

stuckist

Pennywise I am sure you are correct, I am just very nervous and vulnerable at this point in my life. I don't have a lot of options and have no hope of a private pension so am very worried about losing my state pension. I know they haven't said exactly what will be happening but only that NIC Class 2 is being done away with.

I will focus on my business if it can be called that but success to me would be turning over £3000 or £4000 a year and maybe up to £2000 profit. I am not very confident I can achieve more due to my health.