NI Records
HMRC recently confirmed that it will write to almost 800,000 taxpayers who could have gaps in their National Insurance (NI) record. According to HMRC, taxpayers who receive a letter or those who utilise its online pension forecast tool and identify gaps in their NI record ‘will be able to make contributions further than the usual six previous tax years and at the original rate’. Here we take a look at NI contributions (NICs).
Gaps in records
HMRC and the Department for Work and Pensions (DWP) are sending letters to certain taxpayers who became self-employed between 2015 and early 2024 regarding failure to register for self-employed status for NICs purposes.
Individuals who didn’t complete a CWF1 to register self-employment may not have paid enough Class 2 NICs and therefore may have gaps in their NI record which might affect their entitlement to the State Pension.
HMRC estimates that around 800,000 taxpayers might have gaps in their NIC history as a result. Current HMRC data estimates around 160,000 taxpayers aged above or within two years of State Pension age could be affected. HMRC is urging taxpayers to check their Self Assessment tax returns for previous years to confirm if Class 2 NICs have been made.
HMRC stated it will send letters to affected taxpayers in stages to ensure it has enough resources to support people who contact it.
New guidance
HMRC recently released new guidance outlining that the State Pension is taxable income but tax is not deducted at source. HMRC bases a full year’s State Pension on:
- one week at the weekly rate before the amount changes in April
- 51 weeks at the weekly rate after the amount changes in April.
It uses the amounts a taxpayer was entitled to receive over the tax year as opposed to the payments they actually received.
Class 2 NICs
Self-employed individuals previously had to make Class 2 NIC contributions at a flat weekly rate where profits exceeded a particular threshold.
From 6 April 2024, the government abolished the need to pay Class 2 NIC by treating those with profits over the Small Profits Threshold (SPT) as having made a notional contribution. The SPT for 2026/27 is £7,105. Voluntary contributions may still be made by self-employed individuals with profits not exceeding £7,105 at a rate of £3.65 per week.
