Paying Class 1 NI for part of the tax year

Would voluntary contributions be required if only working part of year?

Didn't find your answer?

If an employee earns above the LEL every month (and week) for a tax year this should count as one full year of contributions towards their state pension entitlement.

What happens if someone doesn’t work for, say, the first three months of a tax year, and then works full time (as an employee, not a director/owner) for nine months, earning

  1. above the monthly LEL for each of those 9 months and
  2. also having total earnings from those nine months in excess of the annual LEL equivalent.

Would this count as a full year of contributions because of point 2, or would they need to make voluntary contributions to cover the first three months?

Sorry if this is a stupid question; HMRC NI helpline couldn’t answer it.

Thanks

Replies (8)

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By David Ex
26th May 2022 13:09

https://www.gov.uk/government/publications/your-new-state-pension-explai...

Not particularly well expressed.

“What is a ‘qualifying year’?
A qualifying year for State Pension can be made up through combining earnings, National Insurance credits, self-employment and voluntary contributions.

A qualifying year can be built up if:

you are employed and earning over £190 a week (2022 to 2023) from one employer and paying National Insurance contributions
you are employed and earning between £123 and £190 a week (2022 to 2023) from one employer and are treated as having paid National Insurance contributions
you are self-employed and paying Class 2 National Insurance contributions (£3.15 a week in 2022 to 2023)
you make voluntary National Insurance contributions (£15.85 a week in 2022 to 2023)
you receive National Insurance credits – see below
If you do not earn enough you can get National Insurance credits in certain circumstances, for example, when:

you have caring responsibilities (including receiving Child Benefit for a child under 12)
you’re claiming certain working age benefits such as Working Tax Credit, Jobseeker’s Allowance or Employment and Support Allowance
You need to apply for Child Benefit in order to receive your National Insurance credit even if you choose not to receive a payment. It is important that you apply for any credits you may be entitled to as soon as possible as it is not always possible to backdate them.”

Thanks (1)
Replying to David Ex:
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By Hugo Fair
26th May 2022 14:23

All true ... but still doesn't address OP's questions which, as I understand it, is:
* Do the earnings levels have to be achieved in each and every discrete tax month (or even week)? Or only in terms of the cumulative total for the tax year?

I can't find any direct reference but, since NICs are always a 'this period' (not cumulative*) calculation, my expectation is that they will need to be earned each & every week/month throughout the year.
[* = except in the case of a Director].

But DWP (not the HMRC NI helpline) really should be able to give a definitive answer!

Thanks (2)
Replying to Hugo Fair:
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By Hugo Fair
26th May 2022 14:37

If you can't get hold of anyone helpful at DWP ... there is a more nuanced article here that you may find useful: https://www.litrg.org.uk/tax-guides/students/going-abroad/national-insur...

Ignore the bit about going abroad and focus on the section headed "How much National Insurance do I need to pay to get a state pension?"

Thanks (2)
Replying to Hugo Fair:
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By Paul Crowley
26th May 2022 14:39

I may be wrong (as in any daft recent changes) but I thought that the employee one was the easiest and that looks just at the annual figure
If p60 income shows more than the annual minimum, the year qualifies.

@OP If any doubt then do the pension forecast after the year end

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Replying to Paul Crowley:
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By Paula@Butt
26th May 2022 16:08

Almost - you need to look at the earnings in the NI boxes (above LEL, between LEL and Primary Threshold and between Primary threshold and upper earnings Limit)and check whether the combined total in those boxes exceeds the annual minimum (LEL). It's possible for someone to have a really high income figure on their P60 but still not make that a qualifying year as most of the earnings are over the upper threshold.

The client's government gateway account has a lot of really useful information on NI records and qualifying years.

Thanks (4)
Replying to Paula@Butt:
RLI
By lionofludesch
26th May 2022 18:21

Paula-AT-[*** wrote:
]

Almost - you need to look at the earnings in the NI boxes (above LEL, between LEL and Primary Threshold and between Primary threshold and upper earnings Limit)and check whether the combined total in those boxes exceeds the annual minimum (LEL). It's possible for someone to have a really high income figure on their P60 but still not make that a qualifying year as most of the earnings are over the upper threshold.

The client's government gateway account has a lot of really useful information on NI records and qualifying years.

Exactly so.

The snag is that the information you need isn't on a P45.

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Replying to Paula@Butt:
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By Paul Crowley
27th May 2022 14:53

Agreed
the only figures that drop out are for the pay periods below LEL
Not usually a problem for monthly pay periods unless there are periods of nil or very low income

Thanks (1)
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By ChrisKM
26th May 2022 16:26

Thanks to everyone for those answers. I didn't know about the P60 part.

So it seems the answer is: i) you don't have to earn above LEL in every pay period of the tax year to get a full year for NI, but ii) it isn't just a simple cumulative calculation.

Thanks.

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