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Changes to voluntary National Insurance Contributions

by Rob Thresher

The end of the transitional arrangement which allows for individuals to make voluntary National Insurance (NI) Contributions going back to 2006 has been extended again!

Earlier this year we advised that the transitional period was coming to an end on 31 July 2023, this has now been extended until April 2025. From this date, it will only be possible to make voluntary contributions for the previous six years.

Gaps in your NI record can arise because of a period of unemployment, being self-employed but earning below the NI threshold amount, or working abroad.

The number of qualifying years of NI Contributions is important as it affects the amount of state pension you are entitled to. State pension entitlement is calculated based on the number of qualifying years of NI contributions that you have made. A minimum amount of contributions is required for a year to count as a 'qualifying year' towards your overall entitlement.

For those reaching state pension age after 6 April 2016, the new state pension rules will apply. You will need 35 years of qualifying contributions to be entitled to the full new state pension, which amounts to £203.85 per week for 2023/24. However, because of the special rules governing the transition from the old state pension to the new state pension, your starting amount of pension entitlement may be based on the state pension entitlement you had built up prior to 6 April 2016 under the old system. This means you may be able to top up the basic state pension element of this starting amount if it is based on an incomplete record of NI contributions.

You can check your NI record and state pension entitlement through your personal tax government gateway account . Voluntary Class 3 NI payments can be made directly to HMRC via your online gateway account to complete gaps in your record. The amount payable in the 2023/24 tax year will be £17.45 per week, however this can vary depending on the year you wish to top up.

If you are self-employed but do not meet the small profits threshold at which Class 2 NICs become payable (giving you a qualifying year of NI contributions), it is possible to make voluntary Class 2 NI payments to avoid gaps in your record appearing. Class 2 NIC equates to £3.45 per week for the 2023/24 tax year and is payable through your Self Assessment tax return.

Although this transitional period has been extended until April 2025, we would recommend checking your NI record as soon as possible to ensure that it is correct, up to date and you can then plan to ensure that you will be entitled to as much State Pension as possible.

It is important to note that voluntary contributions won't always increase your state pension and action should not be taken without consideration given to your own personal circumstances.

If you have any questions or wish to speak to an adviser then please contact us.

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