What is a Small Income Exception (SIE)?
If you have a very low income a Small Income Exception (SIE) excuses you from paying Class 2 contributions.
Self employed Class 2 contributions
What income is taken into account?
When claiming you must declare all your income, including any benefits in kind which you receive, (for example, the value of any free food and lodging). We may ask you for evidence to support your application.
Certain Social Security benefits will not be taken into account when your income is worked out.
All information you give about your income will be treated in the strictest confidence.
How do I apply?
You will need to produce your tax assessment from two years previous. So for 2018 we will need to see your 2016 tax assessment.
How having an SIE and not paying your contributions affects you
Although having an SIE means that you do not have to pay any Class 2 contributions, it does mean that for the time you have your SIE no contributions are being made. This will lead to a gap in your contribution record. Any gaps you have in your record can affect all the contributory benefits.
Benefits that your contributions entitle you to:
- Short Term Incapacity Allowance
- Long Term Incapacity Allowance
- Incapacity Pension
- Maternity Allowance
- Survivors Pension
- Death Grant
Can I have an SIE and pay Class 2 contributions?
If you are granted a Small Income Exception, you may still contribute at the standard Class 2 rate £536.25 for any month you want to. This will build up your contribution record and might entitle you later to benefit at a lower rate.
If you go to work for an employer for 8 hours a week or more, Class 1 contributions will be paid and credited to your contribution record. You may also pay any missing contributions at any time before you reach pension age. These contributions would be due at the rate that applies at the time you pay.