Class 2 National Insurance Contributions (NICs) have to be paid by individuals who are self-employed or a sole trader. The cost is £2.75 per week (for 2014-15) and this payment counts towards benefits such as the State Pension, Maternity Allowance and Bereavement Benefit. Class 2 NICs do not count towards Statutory Sick Pay, Job Seeker Allowance, the additional State Pension or Employment Support Allowance.
If your self-employed or sole trader income is below £5,885 per annum (for 2014-15) you can apply to HMRC for a Certificate of Small Earnings Exception which will exempt you from paying Class 2 NICs. However, you should bear in mind that if HMRC agree to the exemption you may lose your entitlement to the State Pension and other benefits.
For each complete week you are unable to work due to illness or because you are caring for someone you don't have to pay Class 2 NICs. As long as you are in receipt of certain benefits during this period you may be able to receive National Insurance credits instead. These credits will ensure you maintain your National Insurance record and protect your entitlement to the State Pension and other benefits.
You do not have to pay Class 2 NICs if you are under 16 or over State Pension age.
For further information visit the HMRC website - http://www.hmrc.gov.uk/working/intro/class2.htm
Class 2 NICs are due if you are both employed and self-employed unless you have applied for the Certificate of Small Earnings Exception or for a deferment until your total contributions for the year are calculated. This will ensure you do not overpay NICs.
For further information on deferring Class 2 NICs visit the HMRC website - http://www.hmrc.gov.uk/working/intro/employed-selfemployed.htm