ANNEX A: Background on National Insurance for the self-employed Earnings for Class 2 purposes
5.The term ‘earnings’ for social security purposes includes “any remuneration or profit derived from an employment”. The effect of this is that the definition of earnings for NICs purposes applies equally to the income of an employed and a self-employed earner although how such earnings are calculated or estimated differs between the two.
6.Since Class 2 contributions are a flat rate contribution, not earnings related, the question of a self-employed earner’s earnings only becomes relevant in the context of eligibility for the SEE, which is based on net earnings.
7.Net earnings for the purposes of the SEE is interpreted as meaning the figure which would normally appear in a profit and loss account prepared in accordance with normal accounting principles. Deductions are allowed for business expenses and depreciation but not for income tax or Class 2 or 4 NICs paid.