22 August 2017
There are various reasons why gaps may arise in an individual's National Insurance contributions (NICs) record and, in certain circumstances, these gaps may need to be paid in order to qualify for full entitlement to benefits such as the state pension. Gaps may arise because that person has been on low earnings for several years, because they have been living abroad or because they have been unemployed and have not been claiming benefits.
Broadly, voluntary contributions may be paid for any tax year in which the individual is aged over 16 and is:
- employed, but not liable to pay Class 1 and/or Class 2 contributions (because earnings are too low to qualify for paying NICs);
- excepted from paying Class 2 contributions (because earnings from self-employment have not reached the entitlement threshold);
- not working;
- resident in the UK but living or working on secondment abroad; or
- self-employed.
An individual may get National Insurance credits if they are unable to work, they are entitled to certain benefits or in other specific circumstances, for example being on an approved training course or attending jury service. In addition, for someone who cares for a child, or a sick or disabled person, payment of Home Responsibilities Protection (HRP) may cover gaps in a NIC record.
Topping up
Class 3 NICs are voluntary, so if a gap in contributions is identified, the choice of whether to make good the shortfall is entirely up to the individual concerned. Voluntary contributions are payable at the rate of £14.25 per week for 2017/18.
There are two main ways of paying Class 3 NICs:
- monthly: by direct debit
- quarterly: HMRC will issue a bill every 13 weeks
Generally, the shortfall must be made up within six years. For example, Class 3 contributions for the 2011/12 year would need to be paid by 5 April 2018.
A self-employed individual may be exempt from paying Class 2 contributions because their income is below the small profits threshold (£6,025 for 2017/18), but he or she can currently pay voluntary Class 2 contributions to maintain their NIC record. These amounts are considerably less than Class 3 contributions (the rate for 2017/18 is £2.85 per week) and they protect entitlement to more benefits. It is worth noting that Class 2 NICs will be abolished from April 2018, so it may be worth checking NIC records before then.
In certain circumstances, it is possible to pay up to an additional six years of voluntary Class 3 NICs to enhance entitlement to a basic state retirement pension. This is over and above those allowed under the usual time limits outlined above.
Please see the gov.uk website for further details and contact me or your usual UHY adviser if you have any queries on this issue.
