Small Earnings Exception
You have to pay Class 2 contributions if you are self-employed in your spare time. This applies even if you are also paying Class 1 earnings related contributions as an employee, or office holder. But you do not have to pay Class 2 contributions if you apply for and are given a certificate of Small Earning Exception.
If you are self-employed and get Jobseeker’s Allowance (JSA) you may be awarded JSA credits but you remain liable for Class 2 contributions. However, if your earnings from self-employment are below the small earnings exception level, you can apply for a certificate of Small Earnings Exception. If awarded, you need not pay Class 2 contributions.
Do I have small earnings?
You will be classed as having small earnings and may not have to pay Class 2 contributions if your earnings, that is money left after expenses, were less than Small Earnings Exception annual limit. Levels applicable to each tax year can be found on the Rates and Threshold page.
You cannot apply for small earnings if your net earnings exceed these levels.
What if I am self-employed in more than one business?
If you are self-employed in more than one business you should add together the net earnings from each to get to your total net income.
This should be your gross earnings less any allowable expenses. Details on your profit and loss and allowable expenses can be found in Guidance Note 4 – Self Employment.
What if I am employed and self-employed?
If you are employed you will be paying Class 1 employees National Insurance and will be liable for Class 2 National Insurance for your self-employment. You may be able to apply for the small earning exception if you have net earnings below the annual limit.
If your employed earnings are above the Upper Earnings Limit and your self-employed earnings area above the annual limit then you may be able to postpone the payment of Class 2. Further details can be found on the deferment page.
When should I apply for small earnings exception?
You should complete the form if you think your earnings are below. The certificate is valid from the date of application and may be backdated up to 13 weeks. You will be liable for payment of Class 2 for any periods not covered by the certificate.
If you have a small earnings exception granted a renewal form will be sent to you at the end of the tax year for you to complete for the following year. If you do not receive a form please complete and submit a copy which is available on the Forms page, National Insurance.
Does the Small Earnings Exception Certificate affect my entitlement to benefits?
Class 2 contributions count towards:
- Incapacity benefit
- Bereavement Benefit
- Maternity Allowance
If you are only liable for Class 2 contributions you should consider whether to apply for a Small Earnings Exception as you will not have paid any contributions, so you may lose entitlement to benefits.
Does the Small Earnings Exception Certificate affect my Manx State Pension?
If you are only liable for Class 2 contributions then you will not have paid any contributions to get a qualifying year and it will affect the amount of State Pension you receive. Further details can be found on the Pensions page.
What if I have applied for a Small Earnings Exception but choose to pay my Class 2?
You can elect to pay the Class 2 by ticking the box on the form.
What if I have paid too much National Insurance?
You can apply for a refund, more details on this can be found on the refund page.