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MORE NATIONAL INSURANCE THAN PENSIONS

totaltool
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Joined: March 30th, 2019, 10:48 am

MORE NATIONAL INSURANCE THAN PENSIONS

#404266

Postby totaltool » April 14th, 2021, 5:53 pm

Hello, looking for some guidance. I plan to stop working in next 3 months or so. If I went at end of June my total income from the job would be at £8,8k. My understanding is below £184pw you don't pay NI and £8.8k equates to £170pw over the whole of 2021/22. So I shouldn't be paying NI but for three months they will be taking (based on recent payslips) £253 per month say £750 approx.

This number is not far off the voluntary contributions of £782 for Class 3. So can anyone help with the following

If I stop when planned will I just lose the 3 months NI I paid and need to make the voluntary fee in total OR will it go towards the NI voluntary fee and I make up the difference OR will I get it back similar to overpaid tax (as I would need to pay the year the second and third options are effectively the same)

If it is the first I may well work an extra couple of weeks. Any comments welcome.

Thanks

JohnB
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Re: MORE NATIONAL INSURANCE THAN PENSIONS

#404285

Postby JohnB » April 14th, 2021, 6:50 pm

You don't get it back, as its calculated weekly, not like income tax with an annual allowance.

Do you qualify for a full new state pension already? If not then its more a question of topping up the contributions to £800 with a lump sum sometime in the next 6? years.

mc2fool
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Re: MORE NATIONAL INSURANCE THAN PENSIONS

#404304

Postby mc2fool » April 14th, 2021, 8:19 pm

Ok, if you haven't already, the first thing you should do is get yourself a state pension forecast. Sign up for it online as that also gives you access to your NI record and, of course, you can log in anytime in future to get an update. Start here: https://www.gov.uk/check-state-pension and click the Start now button.

Secondly, a couple of tangential points:
a) Yes, if you are below the Primary Threshold (£184pw) you don't pay NI but as long as you are above the Lower Earnings Limit (£120pw) you'll still get NI credits for the week; see here.
b) Class 3 contributions for this year are £15.40pw = £800.80 for the year; See here.

However, those are, as I say, tangential in your case because if you do leave at the end of June having made a total income of £8,800 -- indeed, anything over £6,240 (52 * £120) -- then as long as you earned that total from weeks where you earned more than the Lower Earnings Limit (£120pw) then 2021/22 will be a qualifying year for you. So, assuming you earn the £8,800 evenly up to June then you're all set for 2021/22. :D

The mistake you are making is dividing the £8.8K by 52 to see if you qualify, whereas it's actually a little more complicated than that. This explains it:

"A ‘qualifying year’ sounds as though you might need to have a perfect 52 weeks of working for it to count. In fact, any tax year where you receive a minimum amount of earnings, or Class 1 or Class 3 ‘credits’... can be a qualifying year. ...

The 2018/19 tax year could be ‘banked’ as a qualifying year provided you have earned the equivalent of 52 x £116 (the LEL) – total £6,032. Any pay periods in which you have earned under the LEL will not count towards the total, so for example if you earn £187.50 a week for 26 weeks of the year, but only £90 a week for the other 26 weeks of the year then although your earnings in total will exceed the £6,032 amount, you will not have a qualifying year as your earnings in weeks where you exceed the LEL only reach £4,875.
"

totaltool
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Joined: March 30th, 2019, 10:48 am

Re: MORE NATIONAL INSURANCE THAN PENSIONS

#404427

Postby totaltool » April 15th, 2021, 10:12 am

Thanks for the responses. I have already signed up for the Gov website so I know my position regarding State Pension/NI contributions and the years I need to buy as I am 60 so when I pull the plug in June got some way to go re NI. But its great advice as everyone should know where they stand. Never knew NI was so complicated, makes tax look simple! The example you gave makes it very clear and better news than I expected. Thanks again.

mc2fool
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Re: MORE NATIONAL INSURANCE THAN PENSIONS

#404468

Postby mc2fool » April 15th, 2021, 12:30 pm

totaltool wrote:Thanks for the responses. I have already signed up for the Gov website so I know my position regarding State Pension/NI contributions and the years I need to buy as I am 60 so when I pull the plug in June got some way to go re NI. But its great advice as everyone should know where they stand. Never knew NI was so complicated, makes tax look simple!

Yup! :)

If you've got any 2006/7 to 2015/16 NI gaps (unfilled or only partially filled years) and are confused as to whether it's best to fill them or not, post the details described in this post and we'll figure it out for you.

If not then it's fairly straightforward in that each year you add from 2016/17 onward (and forward from now) will boost your pension by a year's worth until you get to either the full new state pension amount or you reach state pension age, whichever comes first.

If you're not aware of it, it is massively cheaper to declare yourself self-employed, doing just a few quids worth of, say, gardening or child minding or ebay trading or whatever, and pay voluntary class 2 NICs than paying class 3 -- £158.60 vs £800.80 for this year. There's discussion of this at viewtopic.php?f=17&t=28843


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