Your State Pension

The extension for taxpayers to top up any shortfalls in National Insurance contributions (NIC) in tax years spanning from the
6 April 2006 to date, will cease on the 31 July 2023 (an extension from the original deadline of the 5 April 2023). From this date, taxpayers will only be able to top up NIC payments for the previous six tax years. A taxpayers' NIC are important as they are used to calculate their entitlement to the State Pension. Taxpayers should therefore check their National Insurance (NI) records to see if they have any missing NI contribution periods.

State Pension and National Insurance contributions

An individual’s eligibility for the State Pension is influenced by their National Insurance record, which consists of the following:

• NI contributions – these are typically made by employed or self-employed individuals, dependent on earnings
• NI credits - available to those eligible, for example individuals who are unemployed, ill or a parent/carer
• voluntary NI contributions – for those who wish to make contributions, but are not automatically required to. For example, individuals who are employed but have low earnings,
• unemployed and not claiming benefits, self-employed with small profits, or living or working outside of the UK. 

To qualify for the maximum 'new State Pension' (received by those retiring on or after 6 April 2016), individuals must have at least 35 qualifying years of NICs. For part payment of the ‘new State Pension’, they must have contributed for at least 10 years.

A partner in a professional firm might not have made sufficient NI contributions in a tax year in the following circumstances:

• they had a break between moving firms
• they took a career break
• they have not been appropriately registered as self-employed with HMRC.

If individuals have not contributed enough prior to reaching State Pension age, then they can make voluntary NI contributions to top up their contribution history. Typically, voluntary contributions can only be made for the prior six tax years, however, there is currently an extension in place, meaning voluntary contributions can be made for prior tax years spanning back to 6 April 2006.

What you need to do

This extension is in place until 31 July 2023 and therefore individuals should take the opportunity to check their NI record to identify any shortfalls in their NI history. If a shortfall is identified, individuals should take appropriate financial advice as it may be beneficial to make voluntary NI contributions before the 31 July 2023 to ensure entitlement to the full State Pension.

Taxpayers should also check that their record is correct and includes NI contributions paid through PAYE or self-assessment, and NI credits earned. HMRC should be contacted to correct any errors.

Taxpayers can check their NI record and can contact HMRC about NIC.

For further information, please speak to your usual Crowe contact or get in touch with our Financial Planning team.