National Insurance

NATIONAL INSURANCE CONTRIBUTIONS 1998-1999 for self-employed people with small earnings Introduction This leaflet is for people who are self-employed and who pay Class 2 National Insurance Contributions. CA02
CA02 This leaflet is for people who are self-employed and who pay Class 2 National Insurance contributions. In some circumstances, self-employed people can be excepted from paying Class 2 contributions

Your Certificate of Exception
Your Certificate of Exception If your application is allowed, the Contributions Agency will give you a Certificate of Exception from liability for Class 2 contributions.

Class 1 This category is set for employees. These contributions are normally collected by the Inland Revenue on behalf of the Contributions Agency.

Class 1A This category is set for employers who provide employees with cars for private use. These contributions are normally collected by the Inland Revenue on behalf of the Contributions Agency.

Class 2 This category is set for self-employed people. These contributions are normally collected by the Contributions Agency.

Class 3 This category is set for people wishing to pay voluntary contributions. These contributions are normally collected by the Contributions Agency.

Class 4 This category is set to those whose profits and gains are chargeable to income tax. Normally class 2 (self-employed) category contributions. These contributions are normally collected by the Inland Revenue on behalf of the Contributions Agency.

If you run a small business which is NOT a limited company, then you will normally be liable for Class 2 National Insurance contributions. However, in certain circumstances you may be liable to pay Class 4 contributions if your profits or gains are above a certain limit. You can obtain more details on this by requesting leaflet CA 01 from you local Social Security Department.

These contributions are earnings related and normally paid by employees on low income. Further details can be found in leaflet CA 01 (NP28) National Insurance contributions for employees.

These contributions are a flat-rate(currently £5.65 per week 94/95 tax year) payment and are collected by the Contributions Agency. Payment can be made either by direct debit or via a quarterly bill sent every 13 weeks. Both methods of payment are in arrears. If you choose to pay by direct debit this can be quickly arranged through your bank or building society.

If you decide to receive a quarterly bill for you Class 2 contributions then this is sent to you every 13 weeks automatically. Issue dates are as follows:

For contributions in 97/98 tax year

July Bill

for the period of 12th April to 11th July

October Bill

for the period 12th July to 10th October

January Bill

for Period 11th October to 9th January

April Bill

for period 10th January to 10 April

Weekly rates for Self Employed - £6.35

Class 3 You can also pay voluntary contributions (currently £5.65 per week 94/95 tax year) to help qualify for some benefits. Class 3 contributions are usually paid if you are except from paying Class 2 contributions, or your records show you are not good enough to qualify for benefit or you are not liable for contributions. Further details on class 3 contributions can be found in leaflet CA 08 (N 142) National Insurance voluntary contributions).

Class 4 This is a contribution which is based on the amount of profits a business makes which is above a certain level. The people who pay these contributions are people who are if employed who make profits on any trade. These contributions are collected when income tax is collected on profits, the rate of contributions are set by the budget set by the chancellor each year. These contributions are assessed and collected by the Inland Revenue, together with Schedule D tax. The contributions shown on tax assessment forms are Class 4 contributions only.

Exceptions from National Insurance Contributions If you are self employed and your net earnings show less then £3,200, you will not be liable for Class 2 contributions. If you feel you qualify for exception then you should apply for an exception certificate. There is a time limit for application, so you must put your application in as soon as possible.

If you are accepted for exception your certificate will be effective from the date you applied. In certain circumstances this can be backdated for up to 13 weeks, so it is worth investigation. It is also worth remembering that if you have been paying class 2 contributions and felt that you were paying in a small earnings period, you may apply for a refund even if you did not apply for an exception certificate at the specific time you received low earnings.

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If you are no longer Self-employed If you decide that you do not wish to be self-employed then you must inform your social security office without delay. This must be done in writing. If you opted to pay you contributions via a quarterly bill, you could inform them by using the “tear-off” section from your last contributions bill. Alternatively, write to the Contributions Agency, Class 2 Group, Department of Social Security, Longbenton, Newcastle upon Tyne, NE98 1 YX.

For direct debit payments, write to the Contributions Agency, Direct Debit Section, Department of Social Security, Longbenton, Newcastle upon Tyne, NE98 1 YX You must also inform your bank or building society so they can cancel your direct debit instructions.

If you want to pay voluntary Class 3 contributions contact your local Social Security office.

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