Topping up National Insurance for missing years

By Graham | April 8, 2023

We previously reminded our readers to review their National Insurance Contributions (NIC) record for any gaps and how it could affect their entitlement to the state retirement pension. The deadline for paying voluntary Class 3 NIC to fill any deficiencies in tax years back to 2006/07 was set for April 5, 2023. However, as many taxpayers cannot get through to HMRC by phone to obtain the reference number needed to make the payment online, the deadline has been extended to July 31, 2023, to cover all periods back to April 6, 2006.

This opportunity applies to people aged up to 70, which includes women born after April 5, 1953, and men born after April 5, 1951. Taxpayers aged under 45 still have 22 to 23 years of working life to pay Class 1 or Class 2 NIC, so it may not be cost-effective for them to pay Class 3 NIC to fill any existing gap years.

Moreover, the good news is that the government is allowing taxpayers to pay Class 3 NIC at the 2022/23 rate of £15.85 per week until July 31, 2023, instead of the 2023/24 rate of £17.45 per week.

It’s essential to remember that paying voluntary Class 3 NIC is an investment decision. You should determine whether paying extra NIC now will give you sufficient extra state pension over your expected lifetime to make the payment worthwhile. To confirm whether paying voluntary Class 3 NIC for specific years will increase your pension, check with the Department of Work and Pensions by calling 0800 731 0175 if you are below the state pension age or 0800 731 7898 if you’ve reached the state pension age. At Mercian Accountants, we can provide you with advice and guidance on NIC obligations and options to help you make informed decisions. Contact us to schedule a consultation today.

National Insurance Contributions (NIC) are critical to the UK’s social security system. They are a way of paying for certain benefits, such as the State Pension and helping to support the country’s public services. For many people, paying NIC is straightforward, as it is deducted automatically from their earnings. However, for some individuals, making voluntary NIC payments may be necessary to top up their NIC records and qualify for certain benefits. In this article, we will provide information on how to make voluntary NIC payments, including the option to pay by cheque and cover letter and discuss some of the critical considerations you should be aware of before making any payments.

If you want to top up your National Insurance Contributions (NIC) record, you may be able to do so by paying voluntary contributions. However, you need an 18-digit reference number to pay online, which can only be obtained by calling HM Revenue and Customs (HMRC). Unfortunately, getting through to HMRC by phone can be daunting, as their phone lines are often busy or unanswered. As a result, many people have been left wondering how to make the payment.

The good news is that the deadline for making voluntary NIC payments has been extended to 31 July 2023, so you have time to make the payment. One option is to pay by cheque, which can be made out to “HM Revenue and Customs only”. To ensure that your payment is processed correctly, write your name and National Insurance number on the back of the cheque, and do not fold the cheque.

In addition to the cheque, you must include a cover letter with your payment. The cover letter should include your name, address, phone number, and National Insurance number. You should also include information about how much you are paying and the period(s). This will help HMRC to process your payment quickly and accurately.

Once you have prepared your cheque and cover letter, you can send them to the following address:

HM Revenue and Customs National Insurance Contributions and Employer Office BX9 1AN

It is important to note that voluntary NIC payments are not mandatory, but they can benefit certain individuals. For example, if you are self-employed or have gaps in your NIC record, making voluntary contributions can help you qualify for certain benefits, such as the State Pension. However, before making any payments, you should speak with a financial advisor or accountant to determine if voluntary contributions are right for you.

Who is eligible to make voluntary National Insurance Contributions? In order to make voluntary National Insurance Contributions, you need to meet certain criteria. For example, if you are self-employed, you may be able to make voluntary contributions to qualify for certain benefits, such as the State Pension. Similarly, if you have gaps in your NIC record, you may be able to make voluntary contributions to fill those gaps and improve your entitlement to benefits.
How much do voluntary National Insurance Contributions cost? The cost of voluntary National Insurance Contributions can vary depending on a number of factors, such as your age, your income, and the period you are paying for. In general, the cost is based on the current rate of Class 3 National Insurance Contributions, which is £15.40 per week for the 2022/23 tax year. However, there may be other factors to consider, such as any discounts or exemptions that you may be eligible for.
What benefits can you qualify for by making voluntary National Insurance Contributions? Making voluntary National Insurance Contributions can help you qualify for certain benefits, such as the State Pension. However, the amount of benefit you receive will depend on a number of factors, such as your age, your NIC record, and the period you are paying for. It is important to speak with a financial advisor or accountant to determine how voluntary contributions may affect your entitlement to benefits.
What are the different types of National Insurance Contributions? There are several different types of National Insurance Contributions, including Class 1, Class 2, and Class 3. Class 1 contributions are paid by employees and employers, while Class 2 contributions are paid by self-employed individuals. Class 3 contributions are voluntary and can be paid by anyone who wants to top up their NIC record. It is important to understand the different types of contributions and how they apply to your situation before making any payments.
What are the deadlines for making voluntary National Insurance Contributions? The deadlines for making voluntary National Insurance Contributions can vary depending on a number of factors, such as the period you are paying for and the type of contribution you are making. In general, the deadline for making Class 3 contributions is six years after the end of the tax year in which the contributions are due. However, checking the specific deadlines that apply to your situation is important before making any payments.

HMRC’s guidance on voluntary NIC is here: Voluntary National Insurance: Gaps in your National Insurance record – GOV.UK (www.gov.uk)

In summary, if you want to make a voluntary NIC payment to top up your record, you can send a cheque and cover letter to HMRC. While it may take some time to get through to HMRC by phone, the extended deadline gives you plenty of time to make your payment by other means. And if you have any questions or concerns about your NIC record or voluntary contributions, be sure to speak with a professional who can help guide you through the process.

If you have any questions or concerns about National Insurance Contributions, including making voluntary payments, you must speak with a professional who can provide guidance and support. At Mercian Accountants, we have a team of experienced advisors who can help you understand your NIC obligations and options and provide tailored advice to meet your needs. Contact us today to schedule a consultation and learn more about how we can help you manage your finances and plan for the future.