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Worried about the abolishment of class 2 NIC for self employed low earners


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I am currently on ESA SG and in the middle of being reassessed.

I am as always worried about losing my ESA.

I am also due to be moving in with my partner in a few months

and as they earn over the threshold I will lose all money anyway

but at least if I am on ESA my stamp will get paid so I will still qualify for my pension in future.

 

 

If I lose my ESA it won't change the fact that I am currently unable to work but I won't get my NIC paid. I

s there anything I can do to get round this issue?

Could I for example become self employed and just pay my stamp myself it it wouldn't be too much money each month.

 

 

My plan is to become self employed anyway but I think it will be sometime before I can make an income.

My partners salary also takes us over the threshold for anything like tax credits

so I won't be applying for anything like that.

 

 

My partner knows the situation and is happy to support me financially,

the main issue for me is to still keep my national insurance contributions up

without being hassled by the job center or work programme.

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Alot will depend on when you plan to actually become self employed from an earning point of view

 

You can declare self employment anytime but no later than 3 months from when you begin it, you will then pay class 2 contributions which you can also top up with class 4 contributions to make full NI contributions.

 

What neither i nor anyone else would recommend is simply declaring self employment with no intention of earning, this can only cause you problems with HMRC when theres nothing to put on a tax return, or worse, figures are fabricated to appear that you are earning.

 

now im not suggesting the latter is your intention but HMRC move in mysterious ways and you can guarantee that they know more than you think they do when it comes to your finances

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Well I am an artist,

that is what I trained as and I still paint

but I have no idea when someone might buy one of my paintings

or how much I can sell them for at the moment.

 

 

I would imagine that at least initially I would earn little to no profit as any money earned

would be spent on buying new materials to work with.

 

 

Even if I do earn it will be far below 10,000 you need to earn to start paying tax.

I also have ongoing health issues that prevent me from getting a "proper" job

so that would affect my ability to work consistently.

 

 

Ideally I need to be on ESA in the SG as I am now but I see so many lose this

I feel I must find some other way of keeping my contributions up if I lose this benefit.

 

If I become self employed and pay class 2 contributions will that entitle me to a full pension in the future?

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i can see no problem with becoming self employed on that basis, you would need to top up your NI contributions with class 4 contributions aswell to ensure full entitlement.

 

Even earnings of less than 10k under S/E would have to be declared on a tax return despite that generating no tax liability so to keep a full history

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i can see no problem with becoming self employed on that basis, you would need to top up your NI contributions with class 4 contributions aswell to ensure full entitlement.

 

Even earnings of less than 10k under S/E would have to be declared on a tax return despite that generating no tax liability so to keep a full history

 

Thank you for your help so far with this Martin. I am a bit confused about the NIC I would need to pay. I found this online:

 

  • Class 2: if your annual profits are £5,965 or more
  • Class 4: if your annual profits are £8,060 or more (this is payable in addition to your Class 2 NICs).

You calculate your profit by deducting your expenses from your self-employed income.

 

 

If I was earning below £8060 profit would I still have to pay Class 4 NIC even if my profits were only £4000 in a year in order to get full entitlment? If I might not even earn enough to cover my materials and NIC which would be difficult.

 

 

 

If this is how I need to proceed then I will get some face to face advice on keeping records and such.

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My accountant always advised i paid the class 4 regardless of earnings but the choice would be yours as long as you kept good record of income/profit.

 

he advised this because earnings levels can change throughout the year.

 

so basically for you, you may sell 1 piece of art in 6 months, then 10 pieces in the following 6 months, for the first 6 months your earnings would be below the class 4 threshold but the following 6 months fly you over, so to alleviate, keep the class 4 contributions available to pay at the end of the year if needed.

 

Of course if they are not needed due to earnings being below class 4 contributions level, then you effectively have a bonus pot!!

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Thanks for that, I don't really believe I will earn anything but it makes sense to keep anthing I do earn to the side so I don't get caught out with a big bill. I really need to get some proper advice on this as I don't want to end up in trouble.

 

Thanks again.

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If you are not confident in tax and NI issues then i would recommend you seek a good accountant when the time is right.

 

yes they charge you but they are invaluable in my opinion and can claim things the ordinary man cannot so this usually means they save you more than you pay them.

 

And of course it takes the worry of your tax and NI affairs away, leaving you to concentrate on working and earning, just keep good records

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Even though its not illegal not to have any money, (as far as I know) there is often the suspicion of hidden income, don't know what the law says on such issues..

 

In the OP's case as they are soon to be be moving in with their partner who is happy to support financially, i can see no reason for any suspicion, many couples, married or otherwise, live this way

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We could do with some help from you.

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Ahh thanks Andy, the system has indeed changed since i was S/E.

 

Class 4 are now Class 3 contributions but amounts to the same thing from a threshold point of view

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I am currently on ESA in the Support Group but looking to move to self employment in the future if possible. My health hasn't improved in the 5 years I have been on ESA but my partners earnings are over the threshold so I will no longer get any money and of course I may lose my ESA at any time when reassessed.

 

My concerns are this I want to go self employed and at the moment I believe I could pay Class 2 NIC, £2.80 a week to maintain my eligability for state benefits in future regardless of what I actually earn. I would expect my profits to be very low to nil in the 1st year perhaps beyond at most I'd expect to earn maybe £200 a month. Paying £12 a month for NIC isn't too bad to keep up my stamp.

 

I am worried about the changes in 2018 when Class 2 NIC will be abolished, I won't have to pay the £2.80 a week but unless I earn over £8000 I won't pay the class 4 NIC which is 9% of profits. I am very unlikely to earn £8000 or anywhere near it. If I don't pay at all will I lose months or years of my stamp / eligability for benefits and state pension? It seems I could pay class 3 NIC which are currently £14.10 a week which would be £56.40 a month which is likely to be a massive chunk of my earnings, possibley even more than my earnings.

 

This seems very unfair as I am too sick to work normally and too sick pursue fulltime self employment so I need to either give up my right to a pension or just stay on unemployment benefits for the rest of my life.

 

Can anyone clarify how the abolishment of Class 2 NIC will affect my access to benefits in the future?

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Ahh thanks Andy, the system has indeed changed since i was S/E.

 

Class 4 are now Class 3 contributions but amounts to the same thing from a threshold point of view

 

Just realised that due to changes coming in in April 2018 NIC 2 will no longer be an option. I will have to make £8060 a year profit to qualify for NIC Class 4 of 9% which I know is impossible. The only way to maintain my eligability for benefits such as a state pension will be to pay Class 3 NIC which are currently £14.10 a week totalling £733.20 even if I only make £1000 in a year which is actually higher than the 9% of £8060 I could pay if I made that amount equalling £725.40.

 

It seems very unfair for people who want to work but are unable to do a normal job due to ill health. I feel like I have no option but to stay on ESA for as long as I can now which makes me feel very trapped and sad. I am not due to reach retirement age for another 25 to 30 years so who knows what will happen in that time but right now I just don't know what to do, is there any way round this?

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If your health is that bad then PIP may be a possibility except it doesnt count as taxable income, you may well need to claim income support/jsa as well

 

Not entirely au fait with the latest benefits rules

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I am not legally trained or qualified, any advice i offer is gleaned from experience and general knowledge, if you are still unsure after receiving advice please seek legal advice.

 

 

 

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If your health is that bad then PIP may be a possibility except it doesnt count as taxable income, you may well need to claim income support/jsa as well

 

Not entirely au fait with the latest benefits rules

 

Thanks, with my condition is is quite difficult to get PIP although I haven't tried, I know of no person who has managed to get it. My partners earnings take us over the threshold for any other support.

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your class 2 NI contributions never helped you anyway, only class 4.

If you are in a position to put away even £12 a month you can put it into a pension scheme and the Govt will give you tax relief on your contribution even though you dont pay tax. This means that your £12 becomes £14.20 being invested in the fund. A unit trust based pension is cheap to run as far as management fees go (not more than 1%, typically 0.75%) and all gains are tax free.

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