Avoid delay in receiving your contributory Employment & Support Allowance if you are self-employed

Published on 9 January 2017

Paying your Class 2 National Insurance (NI) contributions for 2015/16 early will enable any claim for contributory Employment & Support Allowance (ESA) made in January 2017 to be paid more quickly.

If you are unable to work due to an illness or disability, you may be able to claim ESA – either income-related, contribution based or both. Entitlement to ESA is based on NI contributions paid for the two tax years that ended before the calendar year in which the claim is made. So a claim made in January 2017 depends on contributions having been paid for the tax years 2014/15 and 2015/16.

If you are self-employed, your entitlement will be based on your Class 2 NI contributions, however Class 2 NI contributions for 2015/16 are not due until 31 January 2017. If a claim is made during January 2017, no ESA may be paid until the Class 2 NI contributions due for 2015/16 have been paid. It may make sense, then, for you to pay the contributions early. In most cases, any payments made to HMRC would be automatically set against your Class 2 NI liabilities, but this might not be the case if you have outstanding debts due to HMRC. In that case, when you make the payment you should make it clear it is the Class 2 NI contributions that are being paid. This is most easily done when the payment is made by phone or by post using the information from GOV.UK.

If the contributions are paid on the due date of 31 January 2017, any claim to ESA made during January 2017 will then be allowed and a backdated payment of any increased entitlement, compared to any benefits already paid, will be made. Unfortunately if contributions are paid after the due date of 31 January 2017, no entitlement to ESA will be available for January 2017.

Even though Class 2 NI contributions may have been paid early, the balance of any tax or NI due on 31 January should still be paid by the due date and, if not already filed, the tax return for 2015/16 must be filed by the same due date of 31 January 2017 to avoid penalties and to demonstrate entitlement to pay Class 2 NI contributions.

You can find out more about ESA on the GOV.UK website.

You can read more about NI contributions and state benefits in our 'tax basics' section.

(09-01-2017)

Contact: Gillian Wrigley (please use form at http://www.litrg.org.uk/contact-us) or follow us on Twitter: @LITRGNews