Business Newsletters - Spring 2007

National Insurance Matters

If a spouse is employed by the family business it is probably now worth paying earnings in 2006/07 of between £84 (the lower earnings limit) and £97 (the earnings threshold) per week. There will be no employees’ contributions due on the earnings but entitlement to a state retirement pension and certain other benefits is preserved. No employer contributions are payable if earnings do not exceed £97 per week in 2006/07. Note that the thresholds will be £87 and £100 per week respectively in 2007/08.

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A PAYE scheme would be needed to establish the employee’s entitlement to benefits.

For the self-employed there is a requirement to pay a flat rate contribution (Class 2). If your profits are low you can apply for exemption. The limit for 2006/07 is £4,465. If contributions have been paid for 2006/07 and it subsequently turns out that earnings are below £4,465 a claim for repayment of contributions can be made. The deadline for this claim is 31 December 2007.

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On the other hand it may be advisable to pay the contributions in any event in order to maintain a contributions record. The alternative voluntary Class 3 contributions are £5.45 a week higher.

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