NATIONAL INSURANCE CONTRIBUTIONS
General |
Payment of National Insurance Contributions |
National Insurance Credits |
Contributory BenefitsIf you live in the United Kingdom you should visit the UK Department of Work and Pensions website - we can only deal with queries concerning the Isle of Man.
General
Most people who work have
to pay National Insurance contributions.
There are four classes
of contributions and in the course of a person's working life they may
need to change from one class to another or pay more than one class at
a time.
The level of a person's
contribution and the rules regarding payment depend on the Class of contribution
they pay.
-
Class 1 - Paid by employed
earners and their employers
- Class 2 - Paid by self-employed
earners
- Class 3 - Paid voluntarily
by persons not liable for any other Class of contribution
- Class 4 - Paid in addition
to Class 2 contributions by self-employed people whose profits are above
certain levels
- Class 1, 2 and 3 contributions
count for various National Insurance benefits.
- Class 4 contributions do
not count for any benefit
Earnings Factors
For a tax year to qualify
for contributory benefit purposes, an insured person must pay sufficient contributions
at either the Class 1, 2 or 3 rate to achieve the required Earnings Factor
set each year, or to have had earnings from employed earner's employment
at least equivalent to the lower earnings level (LEL) which is set
each year, even though contributions have not been paid on those earnings.
An earnings factor is a
figure which represents the amount of earnings on which contributions
have been paid or treated as paid.
Payment of National Insurance Contributions
Employed earners' Class
1 primary contributions are collected by their employer who deducts the
appropriate amount from their pay.
Class 1 and Class 4 are
usually collected by the Income Tax Division. Class 2 and Class 3
contributions are collected by the Contributions Section of the Department. Click here for an application form to pay Class 2 contributions.
To count for benefit purposes,
contributions must be paid within strict time limits. There is also
a time penalty if contributions reckoning for a particular benefit claim
are not paid until the time of that claim.
National Insurance Credits
To the extent necessary to make up a qualifying year, Class 1 credits can be awarded to you instead
of having to pay contributions if you are -
- claiming Jobseeker's Allowance (even if you are not entitled to it in certain circumstances)
- claiming Incapacity Benefit (even if
you are not entitled to it in certain circumstances)
- entitled to
- Maternity Allowance
- Carer's Allowance
- Disability Working Allowance
- Family Income Supplement
- on an approved training course
- required to attend jury service and did not have earnings at or exceeding the Lower Earnings Limit from
employed earner's employment
- a man aged over 60 who is not employed
- in receipt of a compensatory payment such as a payment in lieu of notice or a payment in lieu of remuneration
- aged 16, 17 or 18 in that tax year.
Contributory Benefits
The Class of NI contributions paid affects the benefits a person can get.
The benefits for which the fulfilment of contributory conditions are necessary are as follows
Contributions taken into account
| Class 1 | Class 2 | Class 3 | Benefit |
|---|
| Yes | No | No | Jobseeker's Allowance |
| Yes | Yes | No | Incapacity Benefit |
| Yes | Yes | No | Maternity Allowance |
| Yes | Yes | Yes | Bereavement Payment |
| Yes | Yes | Yes | Widowed Parent's Allowance |
| Yes | Yes | Yes | Bereavement Allowance |
| Yes | Yes | Yes | Retirement Pension (basic) |
| Yes | No | No | Additional Pension |
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