Investment advice is a regulated area, so accountants must be careful when advising on whether to pay National Insurance contributions for the benefit of the state pension.
If you’re concerned about your National Insurance record, firstly, I would recommend obtaining a state pension forecast. That will clarify your position and tell you exactly how many years you might be short by if you’re looking to ensure you have a complete record by the time you hit state retirement age.
Under the current regime, if you do find you have a shortfall and need to continue contributing, you have two obvious choices:
- Earn more than the lower profits limit. For the current tax year 2017/18, it is £8,164. You would have to pay National Insurance at 9% on any excess
- Pay Class 3 National Insurance. For the current tax year 2017/18, Class 3 contributions are £14.25 per week
There is a proposal to create a zero-rate band for Class 4 National Insurance, similar to how the lower earnings limit works for employees. This has yet to be legislated though.
If you’d like any assistance with your tax or National Insurance affairs, please get in contact with your local TaxAssist Accountant who would be happy to help.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.