Class 2 NI. Is it worth it.

The_Economist

Is it worth paying class 2 NI if you are self-employed on a low wage.
Would it cover claiming benefits if ever the need arose.

fengirl_2

Its probably not worth paying as it would not entitle you to benefits, but its compulsory, Im afraid.

The_Economist

fengirl wrote: »

Its probably not worth paying as it would not entitle you to benefits, but its compulsory, Im afraid.

I thought they were voluntary based contibutions not compulsory. Thats why i posted to see if it is worth doing them.

dunstonh

Class 2 is compulsary for self employed.

The_Economist

So is there such a thing as a voluntary based contribution.

BoGoF

Yes, Class 3 is voluntary.

You can claim exemption from Class 2 NIC if your profits are below the small earnings exemption figure. For 2008/09 the figure will be £4825.

The form to apply for exemption is here - http://www.hmrc.gov.uk/forms/cf10.pdf

Linda_Secker

BoGoF's right, you can claim 'small earnings exception' if your income is very low, otherwise class 2 NICs are compulsory.

However, they are very cheap (£120 a year?) and DO qualify you for some benefits, notably Incapacity benefit - so if you have an accident or get ill you can claim IB for a short while. They also qualify you for state pension, but nothing else that I am aware of. 'credits' or SEE as above may also entitle you to IB and state pension as well though.

Be aware that AVCs (class 3??) DO NOT entitle you to IB - as we found to our cost late last year when my husband dislocated his shoulder.....:mad: If you are swapping between credits, SEE and class 2 contributions, make very sure that there is no gap between one system and another. Which is what happened to us.

Regards
Linda

The_Economist

Had a look on HMRC website link that BoGoF posted and it says about getting a small earnings exception cert. If one was obtained how would it work on claiming benefits such as incapacity benefit etc. And how does it affect the state pension. If this cert is obtained does it mean that all benefits would be paid even though nothing is being paid in?

seven-day-weekend

If you do not pay any NI because you have a small earnings certificate, you qualify for no benenfits, neither does it count towards your State Pension.

The_Economist

seven-day-weekend wrote: »

If you do not pay any NI because you have a small earnings certificate, you qualify for no benenfits, neither does it count towards your State Pension.

Ouch!!!
Me's thinking time to re-asses the situation. Note too self must win lottery, solve all problems :rolleyes: .