BIM52785 - Care providers: qualifying care relief: National Insurance Contributions
The taxable profit from providing foster or shared lives care is generally treated as earnings from self-employment for NICs purposes. Taxable profits are nil if gross receipts from providing the care do not exceed the qualifying amount. If gross receipts do exceed the qualifying amount, the carer can choose to calculate their taxable profits using the simplified method or the profit method and this applies also for NICs purposes.
All self-employed people aged 16 and over but below State Pension age are liable to pay Class 2 NICs at a flat rate. However, if the carer’s self-employed earnings are low, or even nil if the profits are exempt, the carer may be able to apply for the Small Earnings Exception.
Self-employed people are liable to pay Class 4 NICs if their taxable profits are above a threshold. The amount payable is based on the level of profits.
The rates and thresholds for Class 2 and Class 4 NICs liability are published on the HMRC website.
There are occasions when a carer is not treated as self-employed. This applies when the caring activities do not amount to the carrying on of a trade. An example might be when the carer provides occasional respite care. In this case, the taxable profits, if there are any, will be chargeable to Income Tax as miscellaneous income, rather than as trading income. This means that the carer is not liable to Class 2 or Class 4 NICs on those profits.
In practice, this distinction is only important for Class 2 NICs purposes. Where the provision of care does not amount to a trading activity, taxable profits are likely to be nil as receipts would not be expected to exceed the carer’s qualifying amount.