We reported in the March 2023 edition of Employer Focus that the normal six-year window for employees (and the self-employed) to make voluntary National Insurance Contributions (NICs) was being extended in respect of any NIC gaps arising since April 2006.
Following significant uptake of this initial extension, the time available to make such voluntary payments has now been increased again, meaning anyone affected has until 5 April 2025 to review their NIC records and make any top up payments. This will benefit people whose earnings may have been lower than normal in one or more years since April 2006, for instance due to career breaks, working part-time, or being employed abroad.
The extended deadline is good news, not only because more people will have the opportunity to benefit from the potential to increase their State Pension entitlement, but also because it allows people almost two years longer than originally expected to make any voluntary payments, allowing them to spread the cost over a much longer period.
There was also significant demand on HMRC phonelines in the run up to the last two deadlines, meaning some struggled to access the help they needed with their National Insurance record. Extending the deadline allows more time, but anyone affected would be advised not to leave contacting HMRC until near the April 2025 deadline, when their helplines may again experience a last minute rush.
Background
To recap, most employees have National Insurance Contributions (NICs) deducted from their pay. These are added to amounts paid by their employers to provide entitlement to the State Pension, as well as other state benefits such as Job Seeker’s Allowance.
A “new” State Pension was introduced in April 2016 for people retiring after that date, which generally requires an individual to make 35 complete years of NIC contributions to be eligible for the full State Pension. Anything between 10 and 35 complete years will normally result in a pro-rata reduced State Pension entitlement, although these criteria may differ for people who were already paying NICs before April 2016 (see https://www.gov.uk/new-state-pension/how-its-calculated).
Incomplete years can arise in an individual’s NIC record if their earnings were below the threshold in that year for full NICs to be payable (for instance due to low earnings, career breaks, working part-time or working overseas). The amount required to make a complete year of NIC payments can vary between tax years – for the tax year ending 5 April 2024 an individual will need to earn at least £6,396 in order to pay sufficient NICs to have a complete year. An individual’s NIC record is made up not only of NICs paid on employment income, but also any NICs paid either voluntarily or in respect of self-employment. NIC credits are also available in some circumstances, such as when on parental leave or claiming Jobseeker’s or Carer’s Allowances, so it is important for individuals to review their NIC record to ensure any life events qualifying for NIC credits have been treated correctly.
When the new State Pension was introduced, the Government extended the window for people to pay voluntary NIC contributions in order to make up gaps in their NIC record to allow ‘top ups’ to be paid for the period from 6 April 2006 onwards. That opportunity was due to expire on 5 April 2023 but was extended first to 31 July 2023 and now to 5 April 2025.
Voluntary NICs can be paid to make up for any gaps identified since 6 April 2006, with the weekly rates being maintained at £15.85 for Class 3 NICs (the most likely option for employees) or £3.15 for Class 2 NICs. (The Class 2 rate is only available to employees if their NIC gap relates to working overseas, subject to certain conditions.)
Individuals can review their current NIC record online and also check their forecast State Pension entitlement online. Both services require a Government Gateway login to access, and can also be accessed via the Personal Tax Account or the HMRC App.
If anything does not look right with their NIC record, employees should contact HMRC's NIC team to discuss their concerns. Employees may wish to consider taking independent financial advice before making voluntary contributions.
This article reflects the position at the date of publication (17 July 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.
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