New style ESA – National Insurance contributions tests

StockportGerbil

calcotti said:

StockportGerbil said:..- if Julie paid the equivalent of 26 weeks national insurance contributions at the lower earnings limit and was only awarded 26 weeks national insurance credits would she pass the test as suggested by one of the DWP employees? 

As already advised, the 26 weeks of contributions (whether actually paid or treated as paid) have to be in one tax year. From your earlier narrative this is not the case and therefore she did not pass the test. 

StockportGerbil said: In other words should we ask for the award of 34 weeks National Insurance Credits in tax year 2016 to be downgraded to 26 weeks?

I don't follow what you are saying here at all. Credits are not relevant to meeting the contributions part of the test. From your earlier native she has a total of 34 weeks of contributions in the two tax years but in neither year does she have 26, therefore she fails the contributions test.

Thanks once again for replying (and remarkably promptly - such that I'd updated my response too late.)

This may be me failing to understand National Insurance. I thought it was like tax where if you earned more than a certain amount of money in a week then your were taxed something like 9% on that figure. 

Is the requirement / test, which is reportedly administered by HMRC, one where the actual number of weeks contributions are measured or is it the value of the contributions spread over the weeks not receiving national insurance credits. For instance if you worked on an oil rig and had a three weeks on two weeks off shift pattern, how would that work? Using Julie's example if she's paid enough in over the 17 weeks that was equivalent to 26 weeks contributions would that pass the test? 

Yes I appreciate there is some straw clutching here :-) 

Thanks - it is appreciated.

calcotti

StockportGerbil said:..Using Julie's example if she's paid enough in over the 17 weeks that was equivalent to 26 weeks contributions would that pass the test? 

I am not sure if it possible to earn 26 weeks worth of contributions in less than 26 weeks but even if it is if the record only shows she has 17 weeks then presumably she was not earning enough for this to have happened.

The NI calculation is made weekly or monthly. 

• Someone who earns below the Lower Earnings Limit gets no contributions.
• Someone who earns over the Lower Earnings Limit but below the Primary Threshold is treated as having paid one week of contributions, even though they pay nothing.
• Someone who earns over the Primary Threshold pays NI 

I have always found this quite confusing and can't find a clear explanation of it. For people with variable earnings because weeks when earnings are below LEL are effectively lost for NI purposes. Only earnings in weeks over LEL are counted when working out the total earnings on which NI contributions have been paid.

On entitledto it clearly says you must have worked for 26 weeks.

Welfare Reform Act 2007 Schedule 1 1(c) says "the claimant's earnings determined in accordance with sub-paragraph (2) must be not less than the base tax year's lower earnings limit multiplied by 26". ESA Regualations 2013 regulation 8 says "earnings which exceed the lower earnings limit are to be disregarded.". This would suggest that work must take place over 26 weeks.

kaMelo

StockportGerbil said:

calcotti said:

StockportGerbil said:..- if Julie paid the equivalent of 26 weeks national insurance contributions at the lower earnings limit and was only awarded 26 weeks national insurance credits would she pass the test as suggested by one of the DWP employees? 

As already advised, the 26 weeks of contributions (whether actually paid or treated as paid) have to be in one tax year. From your earlier narrative this is not the case and therefore she did not pass the test. 

StockportGerbil said: In other words should we ask for the award of 34 weeks National Insurance Credits in tax year 2016 to be downgraded to 26 weeks?

I don't follow what you are saying here at all. Credits are not relevant to meeting the contributions part of the test. From your earlier native she has a total of 34 weeks of contributions in the two tax years but in neither year does she have 26, therefore she fails the contributions test.

Thanks once again for replying (and remarkably promptly - such that I'd updated my response too late.)

This may be me failing to understand National Insurance. I thought it was like tax where if you earned more than a certain amount of money in a week then your were taxed something like 9% on that figure. 

Is the requirement / test, which is reportedly administered by HMRC, one where the actual number of weeks contributions are measured or is it the value of the contributions spread over the weeks not receiving national insurance credits. For instance if you worked on an oil rig and had a three weeks on two weeks off shift pattern, how would that work? Using Julie's example if she's paid enough in over the 17 weeks that was equivalent to 26 weeks contributions would that pass the test? 

Yes I appreciate there is some straw clutching here :-) 

Thanks - it is appreciated.

Tax contributions are done on a cumulative basis over whole year, National Insurance contributions are not, they are worked out per individual pay period, there is no averaging over the year or carry over/under from one pay period to the next. There are different levels of contributions due depending upon how much is earned (it's actually 12% you pay on earnings over the Primary Threshold) but you must earn at least £120 per week (Lower Earnings Limit) to get any credit for that week..
You can not have more weeks in contributions than weeks worked, or more specifically, weeks where earnings were above the LEL


Your example of a oil rig doesn't work as, assuming they are an employee, they would be paid weekly/monthly according to their contract of employment, whether they were actually working or not wouldn't matter.

airliner

For the 1st contribution condition, the NI Lower earnings limit must be met for 26 individual weeks in either of the relevant tax years. Weeks across the tax years cannot be combined.

Therefore, as other people has said, your wife unfortunately doesn't meet the first contribution based on the information you have provided.


Incidentally, the second condition can be met by working less than 50 weeks in each tax year, if a person earns enough - kind of like in the oil rig example.
The second condition can also be met by NI credits. 

Robbie64

Many years ago the first condition for the predecessor benefit to ESA (Incapacity Benefit) could be met from any tax year, not just from either of the last two tax years. The rule was changed a number of years ago to move the emphasis to claimants with a recent work history. When this change was brought in, the original rule was left in place for someone who had claimed Carer's Allowance at any point in the last full tax year.

[Deleted User]

airliner said:

For the 1st contribution condition, the NI Lower earnings limit must be met for 26 individual weeks in either of the relevant tax years. Weeks across the tax years cannot be combined.

Therefore, as other people has said, your wife unfortunately doesn't meet the first contribution based on the information you have provided.


Incidentally, the second condition can be met by working less than 50 weeks in each tax year, if a person earns enough - kind of like in the oil rig example.
The second condition can also be met by NI credits. 

I am in a similar position - I lack any recent NI credits (due to working part time for the last 10 years and earning less than the NI cut off) - I am trying to claim NI credits only to make up the missing years on my state pension (I applied 3 weeks ago)

However - it does appear that I will now receive ESA and associated NI credits - I am disabled and had I been entitled (using presumed rules) - I would expect to be in the support group !

I don't understand how or why but my HMRC on-line account - now shows ESA as added income at a rate of £4325 pa

I had assumed that, since my last NI payments were 10+ years ago - they would be irrelevant ?

calcotti

Deleted_User said: I don't understand how or why but my HMRC on-line account - now shows ESA as added income at a rate of £4325 pa

I can’t explain the how or why in respect of why you are getting it but if you are paid new style ESA it is, unlike UC, taxable income and will therefore appear on HMRC records.

Remember that if you have been in work you may not have paid any NI because earning below the primary earnings threshold but if earning more than the lower earnings limit (currently£120/week) you will have been treated as having paid NI.

[Deleted User]

calcotti said:

Deleted_User said: I don't understand how or why but my HMRC on-line account - now shows ESA as added income at a rate of £4325 pa

I can’t explain the how or why in respect of why you are getting it but if you are paid new style ESA it is, unlike UC, taxable income and will therefore appear on HMRC records.

Remember that if you have been in work you may not have paid any NI because earning below the primary earnings threshold but if earning more than the lower earnings limit (currently£120/week) you will have been treated as having paid NI.

I was earning less than £100 per week for the last 10 years!
I have savings and am not entitled to ESA of any sort because of my financial status - hence my claim for NI only 

Robbie64

Where on the HMRC app has the ESA been added? Is it under Pay As You Earn / PAYE Income Tax overview for the current (2021/22) tax year? If so, could it be something to do with a tax code HMRC have allocated to DWP ESA?

[Deleted User]

Robbie64 said:

Where on the HMRC app has the ESA been added? Is it under Pay As You Earn for the current (2021/22) tax year?

Yes - this tax year
It has affected my other pensions by reducing the allowance available to them - but won't pay me a penny