When you are self employed there may be periods when work is unavailable, perhaps if your trade is seasonal. Paying sufficient Class 2 National Insurance Contributions will determine whether you are eligible for specified state benefits while your income is reduced.
Class 2 National Insurance Contributions are paid at a flat weekly rate of £2.50. However, if your annual income is below £5315 you may be able to claim from exemption. If you do stop paying the contributions, this may affect your entitlement to certain state benefits like state pension and maternity allowance. However, the Class 2 National Insurance Contributions don’t count towards contribution based Jobseekers Allowance, so it may be worth having an income protection policy in place. It may be possible to claim income based Jobseekers Allowance, but this would depend whether you were available for employment.
You may be able to claim Employment and Support Allowance if you are unable to work through illness. This is either contribution based or income based, with strict criteria for applying. Income protection insurance is advisable for anyone self employed, to cover periods of unemployment. There are various policies available and advice should be sought before paying into an income protection policy.
Being out of work when you are self employed is something that should be planned for initially. Ensuring some kind of income protection policy is in place, or savings to live on is crucial, especially if your business has periods during the year when demand for goods or services is slow.
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