Will You Get a Full State Pension?

If you are looking forward to retirement, it is a good idea to check out how much state pension you will get. You can do this by logging on to your personal tax account on gov.uk, which contains lots of useful information about how much tax you owe and about your National Insurance Contributions (NICs) record, among other things.

To receive the full amount of the state pension, your NICs record needs to contain 35 complete years. You need at least ten complete NICs years to receive any amount of the UK state retirement pension.

You can plug gaps in your NICs record by paying voluntary Class 3 NICs. This payment generally needs to be made within six years of the gap year. Self-employed traders who do not have to pay Class 2 NICs because their profits are below £6,725 can choose to pay Class 2 voluntarily instead of Class 3; paying Class 2 NICs will be cheaper. For 2022/2023, where profits are between £6,725 and £11,908, no Class 2 NICs are payable, but the trader still gets a NICs credit.

You may also qualify for NICs credits for some years if you were claiming state benefits, Child Benefit or were a foster carer. The NICs credits were not always applied automatically, so it is worth checking your own NICs record in your personal tax account.

If you have already paid enough NICs to get the full state pension, you may consider taking any further funds from your company as dividends, rent, or as contributions to a private pension.

Extended Deadline to Make Voluntary Class 3 NICs

As noted above you can usually pay voluntary contributions for the past 6 years. The deadline is 5 April each year. For example, you have until 5 April 2024 to make up for gaps for the tax year 2017 to 2018.

If you want to make voluntary contributions for the tax year 2016 to 2017, the deadline has been extended. You have until 31 July 2023 to pay.

You can sometimes pay for gaps from more than 6 years ago, depending on your age.

If You are a Man Born After 5 April 1951 or a Woman Born After 5 April 1953

You now have until 31 July 2023 to pay voluntary contributions to make up for gaps between tax years April 2006 and April 2016 if you are eligible.

After 31 July 2023 you will only be able to pay for voluntary contributions for the past 6 years. This may not be enough to qualify for a new State Pension if you have fewer than 4 qualifying years on your National Insurance record. You will usually need at least 10 qualifying years in total.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.