Basics
As you may be aware, National Insurance Contributions (NICs) determine an individual’s entitlement to the State Pension. You may be worried after finding out some gaps in National Insurance records HMRC have for you.
I you need any help in accounting and taxes, please feel free to contact ERAA Consulting Limited.
The amount of State Pension received on retirement, if any, is dependent on the number of ‘qualifying years’ that you have built up over your lifetime.
A qualifying year refers to a tax year during which you have sufficient employment or otherwise qualify for certain ‘NIC credits’.
At present, ten qualifying years are required to guarantee the minimum State Pension, and thirty five years to secure the maximum entitlement.
These years of contributions do not need to be consecutive and it is possible to fill any gaps in a record.
Did you understand the essential basic points above?
If you understood that well, then you’ll know that:
You need to own your NI data and check it once a year.
You don’t want to be reaching the state pension age with gaps in your NI records and not receiving the expected state pension.
Therefore,
- Check if all the Full Payment Submissions have been reflected in the PAYE pages your personal tax account.
- Can you see all the periodic payments as per your payroll records?.
- Is the amount of total NIC the same as you’ve seen in your P60 for the relevant tax year?
If any of the above highlights errors or missing information, then you need to contact HMRC. You need to ensure the records are corrected on time & if anything is missing double check with your accountant or payroll provider (if any).
Reasons for gaps in your National Insurance records
You may get gaps in your record if you do not pay National Insurance or do not get National Insurance credits. This could be because you were:
- employed but had low earnings
- unemployed and were not claiming benefits
- self-employed but did not pay contributions because of small profits
- living abroad
Gaps can mean you will not have enough years of National Insurance contributions to get the full State Pension (sometimes called ‘qualifying years’).
You may be able to pay voluntary contributions to fill any gaps if you’re eligible.
What to do if you found the gaps in your National Insurance records
First, DON’T PANIC.
If a gap in contributions is discovered, the choice of whether to make good the shortfall is entirely up to the individual concerned.
However, if the individual wishes to obtain full entitlement to benefits such as the state pension, contributions should be topped up in a good time.
Voluntary National Insurance contributions can be paid to plug gaps in your contributions record.
Plugging the gaps in National Insurance records
Voluntary contributions can usually only cover the past six years, with the deadline for payments occurring on April 5 each year.
This means that if a person sees that they have gaps in their record for the tax year 2014 to 2015, they’ll have until April 5 2021 to plug the gap.
In some instances, people may be able to pay voluntary contributions for periods earlier than this if they were born in certain years.
Men born after April 5, 1951 or women born after April 5, 1953 will have until April 5, 2023 to pay voluntary contributions to make up for gaps between April 2006 and April 2016.
Conclusion and actions points for you
Check your National Insurance record to find out:
- if you have any gaps
- if you’re eligible to pay voluntary contributions
- how much it will cost
You may also be eligible for National Insurance credits if you claim benefits because you cannot work, are unemployed or caring for someone full time.
Contact HM Revenue and Customs (HMRC) if you think your National Insurance record is wrong.
The above is for general information.
I you need any help in accounting and taxes, please feel free to contact ERAA Consulting Limited.
