Carer's Allowance earnings deduct notional Class 2 and Class 4 from carers over State Pension age #2360

What the law says

For the Carer's Allowance earnings limit, trading profit is net of the Class 4 contributions "which would be payable" on it. Until 6 April 2024 it was also net of the Class 2 contributions payable (SI 1996/2745 reg. 14(2)).

Neither is payable by someone over State Pension age:

• Class 2: no contribution is paid for any week after the one in which the earner reaches pensionable age (SSCBA 1992 s. 11(7)(b));
• Class 4: an earner who is over pensionable age at the beginning of the tax year is excepted (SI 2001/1004 reg. 91(a)).

DWP's Decision Makers' Guide, chapter 15 lists people of pension age as not liable for the notional Class 2 deduction (para. 15682) or the notional Class 4 deduction (para. 15691).

What the model does

carers_allowance_earnings, added in #2312, deducts notional Class 4 (and, before 2024-25, Class 2) from every carer's trading profit, whatever their age. ni_class_2 and ni_class_4 themselves are limited to ni_liable and ni_class_4_liable.

So a self-employed carer over State Pension age has earnings understated by the notional contributions, and can pass the limit when they should not. Example, run at #2312's head 17d034a47: Case 17 (2018, profit £7,000, personal pension contributions £1,400) at age 70 gives earnings of £6,146.60, £118.20 a week, and an entitlement, although ni_class_2 is £0 for that person. Without the Class 2 deduction the figure is £6,300, £121.15 a week, over the £120 limit.

Size

Small:

• The State Pension usually reduces the payment to nil through the overlapping-benefit rule, so mainly the underlying entitlement changes. That entitlement still feeds the Pension Credit carer addition.
• Class 2 applies only before 2024-25.
• Class 4 applies in every year, 2026 included.

Fix

In carers_allowance_earnings:

• multiply the Class 2 deduction by ni_liable;
• multiply the Class 4 deduction by ni_class_4_liable;
• add a case over State Pension age.

Do this after #2312 merges.

Found in the fourth review of #2312.