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National Insurance

Class 2 National Insurance

If you're self-employed you normally have to pay Class 2 National Insurance contributions. These contributions count towards certain benefits - like the basic State Pension, Maternity Allowance and Bereavement Benefit. But any claims for such benefits may be affected if your payments are late.

Class 2 contributions do not normally count towards the additional State Pension, Statutory Sick Pay (SSP) or Jobseeker's Allowance (JSA), so you might want to think about making other arrangements like a personal pension and income protection insurance.

Once registered, you can choose to make your payments either monthly or 6-monthly, by Direct Debit. From April 2011 your Class 2 National Insurance contributions payments will become due on the 31 January and 31 July, the same dates as any Self-Assessment tax bill.

During periods when you are unable to work, and where you have registered your work status with the Department for Work and Pensions, HMRC will be notified and they will adjust the contributions for those periods.

You don't have to pay Class 2 National Insurance contributions if any of the following apply:

  • You are under 16
  • You have reached State Pension age
  • You’re a married woman or widow who is entitled to pay reduced contributions
  • Your earnings are below a certain level - see 'If you have low earnings' below

If you earn less than the Class 2 Small Earning Limit per year, currently £5,315 per anum, you can apply for a Certificate of Small Earnings Exception. This will mean that you don’t have to pay these national insurance contributions.

Class 4 National Insurance

Class 4 National Insurance is payable on self-employment profits over the Class 4 Lower Profits Limit. You work out your contributions on your Self-Assessment tax return and pay them alongside your Income Tax. Class 4 National Insurance contributions don't count towards benefit entitlements.

If you have more than one business, special rules apply for calculating adjustments to profits on which you pay Class 4 National Insurance contributions.

You don’t have to pay Class 4 National Insurance if any of the following apply:

  • You are under 16
  • You are still working in the tax year after you reached State Pension age
  • You are not resident in the UK for tax purposes

You don't have to pay Class 4 National Insurance contributions if you are still working and over State Pension age at the start of the tax year to which your Self-Assessment tax return relates.

National Insurance Credits for Foster Carers

If you qualify for the Class 2 National Insurance Exception then you will most likely be eligible to claim National Insurance Credits. In order to be eligible to receive a credit as a parent/carer, you must meet one of the three following conditions:

  • You are receiving Child Benefit for a child under the age of 12 (a ‘child’ in this context does not include a child in foster care)
  • You are caring for a person who is in receipt of a social security benefit due to an illness or disability, or a person whose need for care has been certified by a health or social care practitioner and whose care is for at least 20 hours per week
  • You are an approved foster carer

If you are an approved foster carer who also falls within the second category, you will also build up entitlement to the additional State Pension (S2P). This will probably only apply to the ‘specialist’ foster carers discussed earlier. This puts foster carers who build up an entitlement to S2P in a unique position. Self-employed people do not normally qualify for this; they only normally qualify for the basic State Pension.

In order to apply for this credit, you will need to complete a form CF411a


Please note that when applying for this credit you will need to send in a letter from your fostering agency or local authority, confirming that you were a registered carer throughout the period for which you are claiming the credit.

If you get National Insurance credits they are added to any National Insurance contributions you have already paid for the tax year. Both count towards your basic State Pension, bereavement benefits or other state benefits (Class 1 credits only). National Insurance credits will not usually be awarded if you have already paid enough contributions in the tax year to qualify for these benefits

FosterTalk Limited, Registered Company in England and Wales
10 The Courtyard, Buntsford Gate, Bromsgrove, Worcestershire, B60 3DJ
Registered Company Number: 06318354