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NI Contributions when receiving State Pension
NI Contributions when receiving State Pension
Hello,
A friend of mine reached State Pension (SP) age on 28 NOv 2021 and she has been receiving SP since then.
She made Class 2 Voluntary NIC for 23 years and her last contribution was from 12/04/2020 to 10/04/2021.She received a letter dated 02/04/2022 from HMRC for National Insurance Contributions Voluntary Class 2 for the period of 11/04/2021 to 27/11/2021.
Her queries are -
1.Is it usual for HMRC to request further NI contributions for the months preceding her retirement date after she has reached state pension age & receiving State Pension?
2. Presumably her current rate of SP was based on her 23 years of contributions. If she pays the latest request of NIC (ie from 11/04/2021 to 27/11/2022), how will that affect her future rate of State Pension?
3. Has anyone experienced a similar request from HMRC & what was the outcome?
Many thanks for your help.
A friend of mine reached State Pension (SP) age on 28 NOv 2021 and she has been receiving SP since then.
She made Class 2 Voluntary NIC for 23 years and her last contribution was from 12/04/2020 to 10/04/2021.She received a letter dated 02/04/2022 from HMRC for National Insurance Contributions Voluntary Class 2 for the period of 11/04/2021 to 27/11/2021.
Her queries are -
1.Is it usual for HMRC to request further NI contributions for the months preceding her retirement date after she has reached state pension age & receiving State Pension?
2. Presumably her current rate of SP was based on her 23 years of contributions. If she pays the latest request of NIC (ie from 11/04/2021 to 27/11/2022), how will that affect her future rate of State Pension?
3. Has anyone experienced a similar request from HMRC & what was the outcome?
Many thanks for your help.
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- Lemon Half
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Re: NI Contributions when receiving State Pension
Ifnotnow8 wrote:Hello,
A friend of mine reached State Pension (SP) age on 28 NOv 2021 and she has been receiving SP since then.
She made Class 2 Voluntary NIC for 23 years and her last contribution was from 12/04/2020 to 10/04/2021.She received a letter dated 02/04/2022 from HMRC for National Insurance Contributions Voluntary Class 2 for the period of 11/04/2021 to 27/11/2021.
Her queries are -
1.Is it usual for HMRC to request further NI contributions for the months preceding her retirement date after she has reached state pension age & receiving State Pension?
2. Presumably her current rate of SP was based on her 23 years of contributions. If she pays the latest request of NIC (ie from 11/04/2021 to 27/11/2022), how will that affect her future rate of State Pension?
3. Has anyone experienced a similar request from HMRC & what was the outcome?
Many thanks for your help.
1) Hmmm .... well, if you are working, either employed or self-employed, it is normal to pay NICs right up to your state pension birthday.
Now, presumably she has been paying voluntary class 2 NIC because her self-employed profits have been below the threshold where she has to pay mandatory ones. Or she is an examiner, moderator, invigilator, minister of religion or one of the other groups that doesn't pay through self assessment. https://www.gov.uk/voluntary-national-insurance-contributions.
But are you sure about the voluntary bit? It does seems strange for HMRC to demand payment of voluntary contributions!
2) It won't affect her state pension at all. The amount is determined by the number of full qualifying years up to and including the tax year before the one when you reach state pension age.
3) Not me.
Re: NI Contributions when receiving State Pension
Thanks!
Yes - my friend is self-employed and eligible to pay NIC class 2. To top up her contributions in the past, she has written to HMRC & hence the letter from HMRC on 2 April 2022 requesting for payment from April 2021 to 27/11/2021 (ie the date before she reached SP age on 28 Nov 2021.
She was wondering whether the latest NIC payment of 7 months (April to Nov 2021) is counted as qualifying year, & will increase her NICs from 23 to 24 years & the corresponding uplift in her SP.
Thanks again
Yes - my friend is self-employed and eligible to pay NIC class 2. To top up her contributions in the past, she has written to HMRC & hence the letter from HMRC on 2 April 2022 requesting for payment from April 2021 to 27/11/2021 (ie the date before she reached SP age on 28 Nov 2021.
She was wondering whether the latest NIC payment of 7 months (April to Nov 2021) is counted as qualifying year, & will increase her NICs from 23 to 24 years & the corresponding uplift in her SP.
Thanks again
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- Lemon Slice
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Re: NI Contributions when receiving State Pension
Ifnotnow8 wrote:Thanks!
Yes - my friend is self-employed and eligible to pay NIC class 2. To top up her contributions in the past, she has written to HMRC & hence the letter from HMRC on 2 April 2022 requesting for payment from April 2021 to 27/11/2021 (ie the date before she reached SP age on 28 Nov 2021.
She was wondering whether the latest NIC payment of 7 months (April to Nov 2021) is counted as qualifying year, & will increase her NICs from 23 to 24 years & the corresponding uplift in her SP.
Thanks again
No it won't count - You need a full year's worth of Class 2 or Class 3 to make a full year.
Also 99% certain that employees who pay Class 1 can't get another year in those circumstances - even if you exceed the annual primary threshold figure in that year.
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- Lemon Half
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Re: NI Contributions when receiving State Pension
Ifnotnow8 wrote:Yes - my friend is self-employed and eligible to pay NIC class 2. To top up her contributions in the past, she has written to HMRC & hence the letter from HMRC on 2 April 2022 requesting for payment from April 2021 to 27/11/2021 (ie the date before she reached SP age on 28 Nov 2021.
Ok, but you say "eliglble to" rather than required to, and the fact that she has written to HMRC to pay class 2 does indicate that they were voluntary NICs, and if they are indeed voluntary then there's no point in her paying them for that period as it won't help her pension.
So, it seems to me that that is the vital thing to determine. Does the letter from HMRC actually request for the payment of Voluntary Class 2 NICs, explicitly using that word?
BTW, you say she is self-employed, rather than was, so FYI from https://www.litrg.org.uk/tax-guides/pensioners/what-national-insurance-do-i-pay-after-retirement
"As soon as you reach state pension age, you stop paying Class 2 NIC if you carry on working. You only have to pay them on any earnings that were due to be paid to you before you reached state pension age. Class 2 contributions are payable on a weekly basis and you do not need to pay them for the week (Sunday to Saturday) during which you attain state pension age."
But of course if they truly are voluntary then you don't have to pay them at all.
If you end up having to lookup the full ins and outs of it all, then this is where to start: https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual
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- 2 Lemon pips
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Re: NI Contributions when receiving State Pension
From GOV.UK
What happens at State Pension age
You stop paying Class 1 and Class 2 contributions when you reach State Pension age - even if you’re still working.
You’ll continue paying Class 4 contributions until the end of the tax year in which you reach State Pension age.
For example, you reach State Pension age on 6 September 2022. You’ll stop making Class 4 contributions on 5 April 2023 and pay your final Class 4 bill by 31 January 2024, together with your Income Tax.
Therefore it appears as has been said that the person only has to pay these Class 2 contributions if they have self employed profits over £6,515 in the 21 22 tax year
What happens at State Pension age
You stop paying Class 1 and Class 2 contributions when you reach State Pension age - even if you’re still working.
You’ll continue paying Class 4 contributions until the end of the tax year in which you reach State Pension age.
For example, you reach State Pension age on 6 September 2022. You’ll stop making Class 4 contributions on 5 April 2023 and pay your final Class 4 bill by 31 January 2024, together with your Income Tax.
Therefore it appears as has been said that the person only has to pay these Class 2 contributions if they have self employed profits over £6,515 in the 21 22 tax year
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- Lemon Half
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Re: NI Contributions when receiving State Pension
mearnsfool wrote:Therefore it appears as has been said that the person only has to pay these Class 2 contributions if they have self employed profits over £6,515 in the 21 22 tax year
Ah, but the quote in my previous post above says that "You only have to pay them on any earnings that were due to be paid to you before you reached state pension age. Class 2 contributions are payable on a weekly basis...", so it may not be quite as straightforward as just using the annual Small Profits Threshold for the whole year. Digging in the HMRC manuals for edge cases needed, methinks!
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Re: NI Contributions when receiving State Pension
Stop talking in riddles. If you have read the manual, quote the sections that matter or just give it a rest rest mc2fool.
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- Lemon Half
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Re: NI Contributions when receiving State Pension
mearnsfool wrote:Stop talking in riddles. If you have read the manual, quote the sections that matter or just give it a rest rest mc2fool.
I beg your pardon?!?
I haven't read the manual on this and I'm not talking in riddles. The source previously referenced states that you only have to pay Class 2 on earnings before you reach state pension age, and so it may not be quite as straightforward as just using the annual Small Profits Threshold for the whole year, as you claim, and so I am suggesting that the person this is actually likely to affect dig in the manuals to see how the apportionment, if so, works in relation to the SPT.
I think that's clear enough. If you don't think so then kindly engage constructively on the matter.
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