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Self employment and benefits - Self employed people and national insurance

If you or your partner are working, or thinking of starting work, as a self employed person you might qualify for welfare benefits to top up your income.

The benefits you are entitled to will depend on a number of things, including your age, the number of hours you work and how much you earn.

Self employed people and national insurance

National insurance is a scheme in which working people make payments that count towards certain benefits. If you work for an employer and you earn above a certain level (known as the 'primary threshold') you will pay Class 1 national insurance contributions (NIC). These will usually be deducted from your salary automatically alongside your income tax. If you are self employed you are responsible for paying your own national insurance contributions. As a self employed person you will usually pay Class 2 NICs and you will also have to pay Class 4 NICs if you earn above a certain amount.

Class 2 NICs count towards most of the contribution based benefits that Class 1 NICs do, including:

They won't usually count towards contribution-based Jobseeker's Allowance but it's worth remembering that your eligibility for this will depend on your NICs over the past couple of years. If you were previously paying Class 1 NICs as an employee and only recently became self employed, you might still qualify for contribution based Jobseeker's Allowance.

You don't have to pay Class 2 NICs if you earn below a certain amount, currently up to £6,025 per year. You will still have to apply to HMRC for an exemption and you might choose to continue paying to make sure you qualify for contribution based benefits. Class 2 NICs are paid at a flat rate of £2.85 per week. This can be paid by Direct Debit monthly or every 6 months, or you can arrange for HMRC to bill you twice a year. Check the HMRC website information on Class 2 NICs  for further details.

Class 4 NICs are applied as a percentage of your yearly profits if you earn more than a certain amount, currently £8,164 per year. They are usually paid alongside any tax you owe.

For more information see the Low Incomes Tax Reform Group's tax and national insurance pages for people who are self employed

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