Trying to get back into work as a disabled person - question about ESA and NI contributions

nicdigby

Hello,
Have been in support group of ESA for a while. Am wanting to do some PW (have sent off PW1).

Here's the scenario I can't work out and I wondered if someone can help me?

- on SG of ESA (Cont). Do not qualify for IR ESA - savings too high.
- also on Child Tax Credits.
- also on Enhanced DL and Mobility for PIP.

Want to try working for 5-6 hours per week PW. I know the limits of 16 hrs and £143/week. Cannot get a job as I'd have to take so much time off for chemotherapy / scans etc which are ongoing indefinitely.

NB: my PIP form does not contradict any of the work I want to do. I get zero points on PIP for the elements that my work would involve, hence why I've chosen it.

I know that I will continue to receive ESA (Cont) during PW and they pay class 1 NI contributions automatically.

Accountant advises strongly to set up a limited company as it's separate, more trustworthy in my profession and has tax advantages.

Here's my question...let's say my working goes well and I stay healthy (currently stable with stage four cancer, very much defying the odds). Let's say I increase my hours per week to 20. I know in that situation I would be better off than now as I'll get WTC including a disability and severe disability premium. However this means I will lose the ESA (ConT) with its class 1 contributions.

But because I can never work full time I might never earn enough to be paid above the £797 pcm (£9568) that would mean that I would be forced to pay class 1 NI contibrutions. I would earn too much for ESA so wouldn't be getting the auto NI contributions through that. I would be somewhere in the middle. If I was self-employed then I understand I can pay voluntary class 2 contributions. BUT if I have a limited company then officially I'm not self-employed but employed. The Gov's website suggests I would therefore only have the option to pay vilntary class 3 contributions left to me at £15.40 per week.

And here's the rub - if my cancer spread and I was unable to work at all due to new chemo regime etc, I wouldn't be able to go back onto ESA (Cont) because the Gov website states that you need class 1 or class 2 contributions for that and that class 3 contributions don't count?!?  So I would not be able to get back on it in that case and I would not be able to get anything else (IR ESA for example) as savings too high. 

Is my understanding of this correct, or have I overlooked something?

Highly likwly I'll remain with lower hours for a period of time, but if I'm well and it takes off, I'd want to do more - but would be severly shot in the foot if I couldn't get back onto ESA (Cont) when I really need it.

Would be grateful for the help of someone who really knows about this sort of thing. I can't find the scenario online anywhere but it's a likely scenario for me.

calcotti

If you set yourself up as a limited company you can pay yourself through PAYE and if you pay yourself at least £120/week you would get Class 1 NI credits.

if instead you register as self employed you can, under current rules, pay Class 2 contributions.

nicdigby

Thank you very much for a swift reply. Am v grateful. It's great news you've given, but pls can you give me a link because this is from gov.uk NI pages and it is what has led me to be so confused.

"

If you’re employed

You pay Class 1 National Insurance contributions. The rates for most people for the 2021 to 2022 tax year are:

Your pay	Class 1 National Insurance rate
£184 to £967 a week (£797 to £4,189 a month)	12%
Over £967 a week (£4,189 a month)	2% Is THIS (below) the quote I should be looking at instead: (but it gives no further details) "If you’re a director of a limited company, you may also be your own employee and pay Class 1 National Insurance through your PAYE payroll." and then it says this: "Directors are classed as employees and pay National Insurance on annual income from salary and bonuses over £9,568. Contributions are worked out from their annual earnings rather than from what they earn in each pay period." But this implies that I would pay it as a director/employee of a limited compnay only if my salary was above £9568 which is £184 per week: can you please tell me where I can find the evidence that it is actually anything over £120 per week? (confused!) Thank you

Spoonie_Turtle

The £120 weekly threshold is for NI credits, not contributions.  Credits from work (earning below the level to pay contributions) count towards the 'NI from working' eligibility condition for ESA.

[I don't know if company directors are any exception to earning NI credits though.]

nicdigby

Ah, have been googling again with Calcotti's info and have found this, is this what the £120 per week thing is? (lower earnings limit)?

"If you have employment earnings above the lower earnings limit (£120 per week for 2020/21), you fall within the NIC system and can get NIC credits. However, you do not actually have to pay any Class 1 NIC until your earnings reach the earnings threshold (primary threshold) (£183 per week for 2020/21).

This means that for earnings between the lower earnings limit and the earnings threshold (over £120 but not more than £183 per week for 2020/21), you enjoy the benefits of the NIC system without the costs. You pay NIC at an effective nil rate, but this can 'buy' entitlement to contributory benefits and the state pension."

nicdigby

So this would mean if my limited company paid me between £120 and £183 per week (It's prob gone up for 2021-22) then I would be getting the exact same NI class 1 credits that ESA (Cont) currently automatically pays for me?

Another question please: I get child benefit. Does this also pay me automatic NI credits of some sort, and what age does the child have to be before this stops?

calcotti

nicdigby said: This means that for earnings between the lower earnings limit and the earnings threshold (over £120 but not more than £183 per week for 2020/21), you enjoy the benefits of the NIC system without the costs. You pay NIC at an effective nil rate, but this can 'buy' entitlement to contributory benefits and the state pension."

Exactly so.

Of course, one downside of being an employee of a limited company is that the company is then supposed to pay you SSP for 28 weeks before you can claim ESA again.

calcotti

nicdigby said: Another question please: I get child benefit. Does this also pay me automatic NI credits of some sort, and what age does the child have to be before this stops?

You get Class 3 credits until the child is 12. These don’t help for ESA.
https://www.gov.uk/national-insurance-credits/eligibility