CURRENTLY, there’s an extended window for individuals to plug holes in their state pension qualifying years record using voluntary NI contributions. However, this is coming to a close after 5 April 2023.
In todays Shipley’s Tax blog we look at what you need to do check if can you have full National Insurance credits on retirement.
Deadline now extended:
The government has just announced an extension of the deadline below to 31 July 2023. Further information below.
As the end of the current tax year approaches, UK taxpayers have until 5 April 2023, to make voluntary Class 3 National Insurance (NI) contributions to fill any gaps in their NI record. This is particularly important for individuals who have missed payments due to career breaks or other reasons.
NI contributions are paid by employees and the self-employed if their earnings exceed a set threshold. Providing you earn enough in any given year, you will be treated as having a “qualifying year” for NI purposes which will be added to your NI record which can directly affect your entitlement to the state pension and other benefits. This is important because the contributions help individuals build up entitlements to state benefits such as the state pension, bereavement benefits, and Jobseeker’s Allowance. The amount of contributions a person makes over their working life determines their entitlement to these benefits.
What happens if I have gaps in my NI record?
Missing years can result in a shortfall when retirement age is attained, meaning only a partial pension is paid. So if the gap is substantial, there may be no entitlement at all. To permit people to catch up on missing years, the government allows payment of Class 3 NI at a fixed rate – known as “voluntary contributions” – to be paid. Making voluntary contributions can help to ensure you have a complete record of contributions and therefore maximize your entitlement to state benefits. This is crucial for individuals who have taken career breaks or periods of unemployment, as this can have a significant impact on your NI record.
How far can you go back?
Normally, you can only go back the last six years. However, there is a current HMRC incentive extending the window back to 6 April 2006 -meaning you can check your NI records going back over seventeen years.
From 6 April 2023 this will revert to the standard six years. It is therefore crucial that you check your NI record and make good any missing years’ contributions for tax years prior to 2017/18 before that date or the opportunity may be lost for good.
Update 08/03/2023: This deadline has now been extended to 31 July 2023.
In summary, if you have missed any NI contributions over your working life, it’s important to consider making voluntary contributions before the extended deadline closes. This will help you to maximize your entitlement to state benefits and ensure that you have a complete record of contributions. However, it’s important to consider your own circumstances and seek professional advice before making any decisions.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email email@example.com.
Please note that Shipleys Tax do not give free advice by email or telephone.