This can be crucial as an incomplete NIC record can directly affect your entitlement to the state retirement pension, as well as other contribution-related state benefits. You need 35 qualifying years of NIC to receive the maximum state retirement pension.
"And 10 qualifying NIC years to receive any state retirement pension at all!"
A deficiency in the NIC record can also mean you are denied other contribution-related state benefits such as employment and support allowance, bereavement support payment, or maternity allowance (for self-employed individuals).
A tax year becomes a qualifying year for NIC when sufficient National Insurance contributions have been paid or NI credits awarded in the year. This total can be a mixture of the NIC classes that are counted for contribution purposes: class 1 (employees only), class 2 (self-employed), or class 3 (voluntary payments), and a mixture of NI credits.
There are a number of reasons why gaps arise. For instance, if you have taken time out of work or were working abroad, there may be no NI paid. If you have claimed state benefits or received statutory pay (such as sick pay) for a period, NI credits should be given automatically. In some cases, the NI credit needs to be claimed where you are eligible.
If you are a non-working parent caring for your child aged under 12, you won't get the NI credit you are entitled to if you have not claimed child benefit for the child. Also, the child may not be allocated a National Insurance number when they reach age 16. If you earn over £60,000, and thus have all the child benefit clawed back under the high-income child benefit charge (HICBC), you can make the child benefit claim, but opt out of receiving the payment.
"You can check your NIC record for your entire working life in your online personal tax account!"
This will also provide an estimate of the state retirement pension you should expect to receive. If you cannot access your personal tax account, there are other ways to check your NIC record, including by post. Tax advisers should not attempt to access their clients' personal tax accounts using the taxpayer's government gateway credentials.
If there is a genuine gap in your NIC record, after corrections have been made, you may consider making voluntary payments of class 3 NIC or class 2 NIC if you are self-employed with low profits. These payments can normally be made for periods within the past six years.
However, HMRC is currently allowing women born after the 5th of April 1953, and men born after the 5th of April 1951, to complete gaps in their NIC record right back to the 6th of April 2006. This opportunity to plug old NIC gaps closes on the 5th of April 2023.
Any voluntary class 3 NIC must be paid at the current rate of £15.85 per week, and not at the rate that applied for the period of the gap. The rate of class 3 NIC is due to rise to £17.45 per week on the 6th of April 2023, so it may be worthwhile paying to fill any recent NIC gaps sooner rather than later!
In conclusion, it is important to keep track of your National Insurance contributions to ensure that you receive the entitlements that you are due. If you have gaps in your NIC record, you may be able to make up for any deficits.
Remember, voluntary contributions must be paid before the 6th of April 2023.
Until next time ...
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about voluntary payments to catchup your National Insurance records, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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