Paying no NI as a director

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As the NI threshold now pretty much matches the personal allowance what would be the impact on a directors state pension if their salary remained at £12.5k and they made no NI contributions? Would they be entitled to a state pension if making no NI contriubtions over an extended length of time?

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By Paul Crowley
26th Jun 2022 20:26

I certainly hope no
None of my client sole directors pay any NI
Very few of companies with plural directors pay any NI particularly when they have other income.

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Replying to Paul Crowley:
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By Hugo Fair
26th Jun 2022 21:02

But OP needs to understand (as I'm sure you do) that director, or indeed *any* employee, needs to have sufficient income to breach the required threshold in order to generate a qualifying year (subject to all the other rules).
Pedantic point: this does NOT automatically mean the employee will "be entitled to a state pension" - merely that, as you've pointed out, there is no direct correlation between paying NICs and eventual receipt of a state pension (or other benefits).

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Replying to Hugo Fair:
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By Paul Crowley
26th Jun 2022 21:18

Agree
But directors are fairly easy to get sorted for a qualifying year if using the annual basis
Employees on part time work paid weekly gives more opportunity for a posible shortage

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ALISK
By atleastisoundknowledgable...
27th Jun 2022 06:16

Surprised no-one mentioned the e’ers ni which would (probably) be payable …

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RLI
By lionofludesch
27th Jun 2022 08:23

Well, you all say it'll be grand but Helen Morrissey, Senior Pensions and Retirement Analyst at Hargreaves Lansdown, says you need to pay NI every year.

https://www.express.co.uk/finance/personalfinance/1626279/state-pension-...

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Replying to lionofludesch:
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By Hugo Fair
27th Jun 2022 09:35

To be fair, you've fallen for click-bait:

* The reporter says "If a person earns an amount too low to pay National Insurance they may not contribute enough towards a state pension. It could leave them with gaps in their record, and thus less than they perhaps expected when they reach retirement."

* But Helen (who I don't know) actually says "Ordinarily a worker should receive an NI credit even if they earn below the threshold as long as they have earnings of more than £120 per week or £6,240 per year. However, it is worth checking to make sure this is the case."

Judicious use by the reporter of 'may not' and 'could' - which are then left out of the headline-grabbing aspects!

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Replying to Hugo Fair:
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By lionofludesch
27th Jun 2022 09:40

So basically, Hugo, if I earn less than £500000 a year, I could be earning less than £6240 a year.

Definitely worth checking............

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Replying to lionofludesch:
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By Paul Crowley
27th Jun 2022 11:59

I thought this was deliberately a tongue in cheeck response. Good one.

Read the link. Assumed a short news day. Deliberately misleading headline. Likely to mislead anyone who does not undestand how it works. A better article would have said that it is a good idea to check your pension forecast once every three years to confirm that all credits are recorded.

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By JCresswellTax
27th Jun 2022 10:51

Are you an adviser? That is a basic question with a simple answer.

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