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National insurance matters
If a spouse is employed by the family business it is probably worth paying earnings in 2007/08 of between £87 (the lower earnings limit) and £100 (the earnings threshold) per week. There will be no employer’s or employee’s contributions due on the earnings but entitlement to a state retirement pension and certain other benefits is preserved. Note that the thresholds will be £90 and £105 per week respectively in 2008/09.Tip
A PAYE scheme would be needed to establish the employee’s entitlement to benefits.
For the self-employed there is a requirement to pay a flat rate contribution (Class 2). If your profits are low you can apply for exemption. The limit for 2007/08 is £4,635. If contributions have been paid for 2007/08 and it subsequently turns out that earnings are below £4,635 a claim for repayment of contributions can be made. The deadline for this claim is 31 December 2008.
Tip
On the other hand as the contributions are only £2.20 a week, it may be advisable to pay the contributions in any event in order to maintain a contributions record. The alternative voluntary Class 3 contributions are £5.60 a week higher.
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