What are National Insurance contributions?
National insurance contributions are effectively a tax on the money you earn as an employee or profits you make if self-employed. These contributions build up over the years to give you the entitlement to claim certain benefits such as Maternity Allowance and State Pension.
Who must pay them?
Anyone earning income from either employment or self-employment must pay National Insurance contributions.
if you are or have been, ill/disabled, unemployed, or caring for someone full-time or on jury service, your National Insurance contributions may be made up by credits. This may also apply if you claim certain benefits.
National Insurance credits may be available if you fall into one of the following categories:
- Ill, disabled or on sick pay
- On maternity, paternity or adoption pay
- Registered for child benefit
- Foster carer
- On Carers Allowance
- On Income support
- Caring for one or more sick or disabled people for at least 20 hours a week
- Grandparents and other family members caring for a child
- On Working Tax Credit
- On Universal Credit
- On a Government approved training course
- On Jury service
- A partner of someone in the armed forces
- Wrongly imprisoned.
View the full list of National Insurance Credits here.
What if I am both employed and self-employed?
If you are employed but also carry out self-employed work, your employer will pay your Class 1 contribution via the PAYE system You may have to pay Class 2 and Class 4 contributions depending on the combined amount you earn from your employed work and profits made from your self-employment. The amount will be calculated once you have filed your self-assessment tax return.
How much in National Insurance contributions do I need to pay?
There are different classes of National Insurance which affect how much you will pay:
- Class 1
- Paid by employees and employers.
- Class 2
- Paid by anyone who is self-employed.
- Class 3
- Voluntary contributions to fill in any gaps in your contribution record.
- Class 4
- For anyone self-employed and having profits over a certain amount.
The National Insurance rates for all classes can be found on the Gov. UK site.
How do I pay NI Contributions as an employee?
If you are employed your NI contributions will be deducted from your wages and paid by your employer via the PAYE system. They will be automatically deducted from your salary each month so there is nothing you need to do.
How do I pay NI Contributions as self-employed?
If you are self-employed your contributions will be calculated when you complete your self-assessment tax return. You will pay any contributions owed at the same time you pay your tax.
How many years do I need to contribute to get a full state pension?
If you have at least 10 years of contributions, you will be entitled to some State Pension but to qualify for the full new State Pension, you will need to have 35 years of contributions.
If you are a man born on or before 6 April 1951 or a woman born on or before 6 April 1953, you will receive the basic state pension for which 30 years of contributions must have been made.
How can I check my National Insurance contributions?
You can check your National Insurance record at https://www.gov.uk/check-national-insurance-record. You will need your Government Gateway login details to access your personal information. The record will show you:
- How many full years of contributions you have made.
- How many years you have left to contribute before your state pension becomes payable.
- How many years where you did not contribute enough.
What happens if I haven’t paid enough NI Contributions to get a full state pension?
If you have gaps in your contributions over the years you may be able to voluntarily top up your contributions to make up the shortfall. You can usually only pay a shortfall for the last 6 years.
Visit the Gov.Uk site to check your eligibility and pay voluntary contributions. However, we always recommend taking financial advice prior to making any voluntary contributions as they may not make any difference to your final State Pension depending upon a number of factors.
When can I claim my State Pension?
Your State Pension will start to be paid once you hit the State Pension age. You are able to put in your claim up to four months before you reach the State Pension age. If you do not submit your claim until after the State Pension age, you may be able to request back payments of up to 12 months. You may also be able to defer your claim to increase your payments.
Visit the Gov.UK site to find out more about deferring your State Pension
Check your State Pension age online as it may be subject to change.
Where can I get more help?
If you would like help checking your National Insurance contributions, your State Pension or any aspect of your retirement planning, get in touch on 01237 472071