When I've earned £6,396 this tax year will that be a "qualifying year"?

[abbeymeadster]

This is the last year that I need to make NI contributions in order to be eligible for a maximum state pension (in due course.)

I thought I'd work until the end of the financial year, but am now considering going sooner. Is it correct that as soon as I've earned (and paid NI) on £6,396 that's considered a full, qualifying year? I've tried looking on the government website etc but it doesn't seem to address working for part of a financial year.

Thank you to anyone who knows.

[abbeymeadster]

Meant to say that £6,396 = 52 x Lower Earnings Limit

[mc2fool]

Is it correct that as soon as I've earned (and paid NI) on £6,396 that's considered a full, qualifying year?

In a word, yes. Provided, that is, it's from one job. It's more complicated if not.

[abbeymeadster]

Thank you.

What about two jobs with the same employer? Does that make a difference do you know?

[abbeymeadster]

I have 2 contracts running simultaneously with the same employer, so I get one payslip covering both.

[mc2fool]

What about two jobs with the same employer? Does that make a difference do you know?

I have 2 contracts running simultaneously with the same employer, so I get one payslip covering both.

I don't know, it's not a situation I recall hearing of before, but I guess the important question is how is it being reported to HMRC. Does the payslip show one set of NIC deductions or two?

A useful and definitive albeit dry and tedious source is the HMRC internal National Insurance Manual: https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual. Section NIM01004 says:

"In general, all earnings from employed earner’s employment(s) with the same employer must be aggregated before determining the amount of NICs due."

So it sounds like everything from your one employer should count together. However, that short and simple page has a Further detailed guidance is contained within ... link that I'll leave you to follow and read onward. You'll see why when you do!

It may be simpler to just ask your payroll dept if they declare and pay your NICs as a single, aggregated, sum ...

[DrFfybes]

Is it correct that as soon as I've earned (and paid NI) on £6,396 that's considered a full, qualifying year?

In a word, yes. Provided, that is, it's from one job. It's more complicated if not.

Are you sure about this? I thought it wasn't 'cumulative' like income tax, and depended upon how you were paid. I thought if you were paid weekly you needed to make 52 payments, or 12 if monthly?

I retired part way through a year (I think I worked until June) and had to top up my NI as that was a part year, even though I was over the LEL for that year.. If all you have to do is earn the LEL in a 12 month period then part years would be very rare.

Paul

[pochisoldi]

Here's how I work it out:
Collect all payslips for the tax year in question.
Put any payslips with no NI to one side.
Add up the taxable pay for the remaining payslips.
If it comes to more than £6396 (or whatever the figure is for the tax year) then you almost certainly have a full year in the bag.

There is an edge case - if the pay for the period is between the lower earnings limit and the primary threshold, there will be no NI payable, but that payslip will count towards the full year. (and shouldn't be put aside when making the above calculation) Identifying payslips that fall into that category is a bit more complicated than simply checking if any NI was paid
.

[mc2fool]

Is it correct that as soon as I've earned (and paid NI) on £6,396 that's considered a full, qualifying year?

In a word, yes. Provided, that is, it's from one job. It's more complicated if not.

Are you sure about this? I thought it wasn't 'cumulative' like income tax, and depended upon how you were paid. I thought if you were paid weekly you needed to make 52 payments, or 12 if monthly?

I retired part way through a year (I think I worked until June) and had to top up my NI as that was a part year, even though I was over the LEL for that year.. If all you have to do is earn the LEL in a 12 month period then part years would be very rare.

Yes, I'm sure, and being over the LEL is not what you say at viewtopic.php?p=477514#p477514: "I worked 3 or 4 months into the new tax year when I retired and because of salary sacrifice was under the 52 X LEL contributions limit".

(Sorry, I wasn't seeking to catch you out, just searched the board for LEL and came across it. )

Here's a fairly clear explanation from Steve Webb (who was pensions minister in the coalition govt):

"...the good news is that weeks (or months) when you are earning more than the lower earnings limit help to make up for weeks (or months) when you were not earning (or earning below the LEL).

To give a simple example, suppose that you have a year in which you do no paid work for 26 weeks and then you do 26 weeks at an earnings level of £236 – double the [2020/21] lower earnings limit.

For the year as a whole, you have qualifying earnings of 52 times the LEL and this is therefore a qualifying year."

https://www.thisismoney.co.uk/money/pensions/article-7873583/How-qualifying-years-state-pension-worked-out.html

[abbeymeadster]

What about two jobs with the same employer? Does that make a difference do you know?

I have 2 contracts running simultaneously with the same employer, so I get one payslip covering both.

I don't know, it's not a situation I recall hearing of before, but I guess the important question is how is it being reported to HMRC. Does the payslip show one set of NIC deductions or two?

A useful and definitive albeit dry and tedious source is the HMRC internal National Insurance Manual: https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual. Section NIM01004 says:

"In general, all earnings from employed earner’s employment(s) with the same employer must be aggregated before determining the amount of NICs due."

So it sounds like everything from your one employer should count together. However, that short and simple page has a Further detailed guidance is contained within ... link that I'll leave you to follow and read onward. You'll see why when you do!

It may be simpler to just ask your payroll dept if they declare and pay your NICs as a single, aggregated, sum ...

My payslips show one set of NIC deductions (and indeed one set of tax deductions). It's designated as pertaining to one contract, but I can see that it's actually 13.25% of the cumulative amount so it seems that my employer does indeed aggregate it.

Thank you for the link to the article by Steve Webb which is very helpful

[CliffEdge]

This doesn't seem clear to me. I think you have to make weekly contributions for a whole year. This can be done in various ways, some unrelated to LEL, eg class 2 or 3 forget what they are, or credits from JSA. Long time since I did this but crucial to get it right.

[mc2fool]

This doesn't seem clear to me. I think you have to make weekly contributions for a whole year. This can be done in various ways, some unrelated to LEL, eg class 2 or 3 forget what they are, or credits from JSA. Long time since I did this but crucial to get it right.

I'd say the afore-linked-to This is Money article makes it very clear. There's also first hand confirmation from a poster on this board:

So provided you earn at least 52 * £120 (the LEL for 2021/22) (i.e. £6240) in the relevant year, you'll have a qualifying year for State Pension purposes, and you won't need to pay voluntary NICs for that year.

Can confirm this is the case from recent experience; although I retired and stopped working on 31 December, the amount earned (and paid in NI) up to that point meant that although I was not working (or paying NI) for the rest of the year, that paid up to 31 December meant it still counted as a full qualifying year for State Pension.

viewtopic.php?p=459887#p459887

[DrFfybes]

Are you sure about this? I thought it wasn't 'cumulative' like income tax, and depended upon how you were paid. I thought if you were paid weekly you needed to make 52 payments, or 12 if monthly?

I retired part way through a year (I think I worked until June) and had to top up my NI as that was a part year, even though I was over the LEL for that year.. If all you have to do is earn the LEL in a 12 month period then part years would be very rare.

Yes, I'm sure, and being over the LEL is not what you say at viewtopic.php?p=477514#p477514: "I worked 3 or 4 months into the new tax year when I retired and because of salary sacrifice was under the 52 X LEL contributions limit".

(Sorry, I wasn't seeking to catch you out, just searched the board for LEL and came across it. )

Oh yes, I'd forgotten about that, and kind of got it in my head it was because it was monthly. I've been looking at part time temp work since then which doesn't make the LEL on average as it isn't for a full year, and there was something wierd about if I worked 30 weeks and hit 90% of the LEL I still needed to make up 22 weeks rather than 10% (5 weeks) but never really got to the bottom of it and didn't take the job anyway.

[mc2fool]

I've been looking at part time temp work since then which doesn't make the LEL on average as it isn't for a full year, and there was something wierd about if I worked 30 weeks and hit 90% of the LEL I still needed to make up 22 weeks rather than 10% (5 weeks) but never really got to the bottom of it and didn't take the job anyway.

Yes, there are weirdnesses! One weirdness that it might have been, depending on how your 90% was spread over those 30 weeks, is that whereas earnings above the LEL in a given period cumulate, earnings below the LEL don't count.

So, if you earned, say, £6,396 (52 * £123 LEL) in a single week then all of it "counts" towards qualifying earnings, as it's over the LEL for the pay period (a week), and you get a qualifying year.

But, OTOH, if you earned, say, £120pw for 50 weeks (total: £6000) and then, say, £500pw for the remaining two, then even though it looks like the total should be £7,000, in fact none of the 50 weeks counts towards qualifying earnings as they are each less than than the £123 for the pay period (a week), so your qualifying earnings only tot to £1,000 and you don't get a qualifying year.

The LEL threshold is dependent on your pay period, so similarly if you are paid monthly then the LEL is currently £533, meaning that any month where you earned less than that wouldn't count towards qualifying earnings. So, 11 months at £500pm plus 1 month at £1000 wouldn't get you a qualifying year as the 11 months wouldn't count.

There's another example at https://www.litrg.org.uk/latest-news/news/180723-any-questions-not-paying-national-insurance-either-my-holiday-jobs:

"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."

[mearnsfool]

It seems a bit rich that the people who are putting such complex conditions on poorly paid people will get their final salary civil service pensions increased by circa 8% to 10% this year. As well as only having a x 20 multiplier on their civil service pension re the lifetime allowance!

[dealtn]

It seems a bit rich that the people who are putting such complex conditions on poorly paid people will get their final salary civil service pensions increased by circa 8% to 10% this year. As well as only having a x 20 multiplier on their civil service pension re the lifetime allowance!

Are they not subject to LPI?

[mearnsfool]

What is LPI?

[DrFfybes]

It seems a bit rich that the people who are putting such complex conditions on poorly paid people will get their final salary civil service pensions increased by circa 8% to 10% this year.

It was 3.1% this year. It is based on CPI for the previous September.

Paul

[mearnsfool]

Sorry, I should have said the civil servants will probably get a 8% to 10% increase in their final salary pensions in April 2023.

[dealtn]

What is LPI?

Limited Price Indexation.

The majority of Defined Benefit Pensions Schemes have a "collar" around inflation such that it is the range 0% to 5% that is applicable.