This refers to a type of scheme where people in employment contribute towards a joint pool of benefits. Such payments made are referred to as national insurance contributions (NIC) and benefits from these are payable after one meets given conditions. This scheme is under HM Revenue and Customs (HMRC) a national insurance contributions office. To claim benefits of tax credit one is required to provide a National Insurance number (NI number) regardless of whether the benefit in question is from national insurance contribution. In order for one to contribute towards national insurance you should meet the following requirements:
1. Must be 16 years and above
2. Must earn a minimum of 153 pounds a week
3. If self-employed, must make a profit of at least 5,885 pounds per year unless with exceptions.
The amount one pays depends on what they earn as well as whether they are employed or are self-employed.
Contributors are categorize into classes that determine the amount of contribution as follows:
Class 1: For the employed, payment is made through their earnings and is deducted directly by the employer. This is therefore not featured in an employee’s net income.
Class 2: This is class comprises the self-employed. They pay contributions normally by quarterly bill or monthly by direct debit. There are proposals for this to be paid through self-assessment in the 2014 finance bill.
Class 3: Made up of the voluntary group. Payment like for class 2 above could be made by quarterly bill or monthly by direct debit. Payment could also be made by an annual lump some payment.
Class 4: Paid with the income tax on your profits through self-assessment.
The core benefits of national insurance could be categorized as those that depend on NIC and those that don’t. Bellow are the benefits listed under their respective category.
Benefits that depend on NIC include:
1. Maternity allowance- This is a weekly payment awarded to pregnant women or those who have recently given birth. Classes 1 and 2 above count to this benefit.
2. Contribution-based job seekers allowance- These are benefits for those capable of working but are still looking for jobs. Only class 1 counts to this benefit.
3. Contribution-based employment and support allowance- These are benefits for those with limitations for work owing to disability or sickness
4. Widows benefits- Benefits to women who lose their breadwinner husbands.
5. Basic state pension- These are for those who have attained pensionable age by state laws. Same as for widows benefits all the classes of payment contribute to this
Benefits that do not depend on NIC include:
1. Child benefits- These benefits are paid to parents or those entailed with the upbringing of a child.
2. Guardians allowance- Are payable to those taking care of children that are not their own.
3. Careers allowance – Careers allowance are for those charged with taking care of persons with disability.
5. Industrial injuries benefits- If by accident at work one contracts disease or is disabled by the same they are entitled to this benefit.
6. Severe disablement allowance-
7. Income based job seekers allowance (JSA) – These are benefits for those not in a permanent job, are capable to work and are still seeking employment.