Taxpayers will now have an extra four months until the end of July to make additional payments to their National Insurance contributions to increase state pension entitlements
The government has extended the voluntary National Insurance deadline by four months to 31 July 2023 to give taxpayers more time to fill gaps in their National Insurance record and help increase the amount they receive in state pension. They will also be able to top up their accounts at the lower 2022-23 tax year rates.
This comes after members of the public voiced concern over the previous deadline of 5 April 2023.
The deadline extension was announced in writing earlier today and HMRC is urging taxpayers to ensure they do not miss out.
The minister’s written statement confirmed the move after a surge in demand for the top-up service. ‘HMRC and DWP have experienced a recent surge in customer contact. To ensure customers do not miss out, the government intends to extend the 5 April deadline to pay voluntary NICs to 31 July this year,’ said Victoria Atkins, financial secretary to the Treasury.
‘This applies to years that would otherwise have been out of time to pay after 5 April, up to and including the 2016/17 tax year. All voluntary NICs payments will be accepted at the existing 2022/23 rates until the 31 July.
We’ve listened to concerned members of the public and have acted.
‘We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their National Insurance record to help bolster their entitlement.’
Anyone with gaps in their National Insurance record from April 2006 onwards now has more time to decide whether to fill the gaps to boost their new state pension.
Paul Falvey, tax partner at BDO said: ‘It’s excellent news that the government is extending the time available for people to decide whether to fill in any gaps in their National Insurance record.
‘Making voluntary contributions won’t always increase your state pension entitlement, but for those who are eligible, a modest outlay to top up incomplete or full years missing from your record may mean a significant boost to your state pension.’
As part of transitional arrangements to the new state pension, taxpayers have been able to make voluntary contributions to any incomplete years in their National Insurance record which fell between April 2006 and April 2016, to help increase the amount they receive when they retire.
Eligible taxpayers can find out how to check their National Insurance record, obtain a state pension forecast, decide if making a voluntary National Insurance contribution is worthwhile for them and their pension, and how to make a payment on gov.uk.
Taxpayers can check their National Insurance record, via the HMRC app or their Personal Tax Account.
ICAEW is warning taxpayers to check their national insurance (NI) record before 5 April 2023 when the government is reducing the window for topping up contributions
Currently, voluntary contributions can be made to plug gaps back to April 2006, but this will be curtailed from April.
Normally, it is only possible to make voluntary contributions for the past six tax years. Currently there is an extension in place so individuals can fill gaps in their NI history from 6 April 2006 to the present date by making voluntary contributions.
However, from 6 April 2023, the timeframe for making voluntary contributions will revert to the normal six years. This means that in the 2023/24 tax year, it will be possible to make contributions going back to the 2017/18 tax year only.
Contribution levels affect the level of state pension paid to retirees.
National insurance contributions are typically made by employed and self-employed individuals based on their earnings. Individuals may also receive NI credits if they are eligible. These NI contributions or credits make up a person’s NI history, which may affect their entitlement to the state pension as well as other benefits, such as employment and support allowance.
In general, to qualify for the maximum ‘new state pension’ (received by those retiring on or after 6 April 2016) a person must have 35 qualifying years of NI contributions. For part payment of the ‘new state pension’ a person must have contributed for at least 10 years.
For those whose NI record started before 6 April 2016, different rules may apply; the number of required years of NI contributions/credits to obtain the full state pension may be higher.
ICAEW warned: ‘If individuals have not contributed enough prior to reaching state pension age, they may not be able to claim state pension, or receive the full state pension amount.
‘To protect state pension and other benefits it may be beneficial for people to make voluntary NI contributions to top up their contribution history, potentially increasing the amount of state pension they will receive. Specific financial advice is recommended when making that decision as it requires predicting, to an extent, what contributions will be made before state retirement age and the risk of future changes in the rules.’
Taxpayers should also check that their record includes NI contributions paid through PAYE or self assessment, and NI credits earned. They should contact HMRC to have any errors corrected.
Actions for taxpayers to take before 5 April 2023:
- check your NI record
- identify any discrepancies between NI contributions paid and those showing on HMRC’s system;
- identify any NI credits that are missing from periods in which they should have been received (eg, on receipt of universal credit or child benefit);
- Identify any shortfalls in contributions;
- contact HMRC if you think there are any errors; and
- decide whether to make voluntary NI contributions.
Employees will see a cut in their National Insurance contributions this month following the reversal of the rise in National Insurance announced in April
National Insurance contributions rose by 1.25% in July for employees and employers under the new health and social care levy designed to raise up to £14bn to fund social care and deal with the NHS backlog following the Covid pandemic.
Following this, since the start of July, workers and employers have been paying an extra 1.25p in the pound.
However, the measure, which was introduced by Boris Johnson’s government, was reversed by former chancellor Kwasi Kwarteng in his mini Budget in September.
It is one of the few economic policies planned by Liz Truss and Kwarteng that has not been scrapped by new chancellor Jeremy Hunt.
The NI cut will be worth an extra £330 on average in 2023-24 affecting almost 28 million people across the UK, while 920,000 businesses will save an average of £10,000.
Working people across the UK will begin receiving the tax cut in their payslips this month via their employer’s payroll, though for some it could be December or January.
The reverse follows the rise in National Insurance thresholds in July, which aimed to lift 2.2 million of the poorest people in the UK out of paying the tax.
All workers earning over the annual national insurance threshold of £12,570 will see a fall in their national insurance bill in November compared to July. Above that level, the rate has gone back down from 3.25% to 2%.
Taken together, the higher thresholds and the Levy reversal means that almost 30 million people will be better off by an average of £500 in 2023-24.
Funding for health and social care services will be maintained at the same level as if the levy were in place.
he Treasury has launched an online tool to show how take home pay will be affected by the upcoming changes to the National Insurance threshold from July
The tax cut represents a £6bn cut to National Insurance effective from 6 July and is worth an average £175 a year to taxpayers and will go some way towards offsetting the 1.5% increase introduced through the social care levy, which came into effect on 6 April.
The online checker will use salary information for employees who are paid through PAYE system, giving personalised estimates of how much they could save because of the government’s changes. All you have to do is enter your current salary before tax and it calculates the estimated saving depending on earnings.
The cut, which will see the point at which people start paying National Insurance rise to £12,570, is worth up to £330 and seven in 10 workers will pay less National Insurance even after accounting for the health and social care levy, the Treasury said.
From July, employees who earn £36,600 or under will pay less National Insurance. For example, a taxpayer earning average salary of £31,285 will pay £185 less over the nine-month period.
Everyone who pays National Insurance will see a tax cut, and the tool will show that employee earning up to £51,000 will see this cut more than offset the impact of the health and social care levy. This means the majority of working people will see a boost to their take home pay.
The tool estimates how much National Insurance an employee paid from July 2021 to June 2022 at the old rate and compares it with how much they will pay from July 2022 and June 2023. However, it is not suitable for every situation and does not provide a calculation of an individual’s National Insurance contributions liabilities.
Chancellor Rishi Sunak said: ‘With our historic £6bn National Insurance tax cut just weeks away, this new tool will show hard-working Brits how much more of their pay will be going directly into their pocket.
‘This tax cut, combined with £400 off energy bills and direct payments of £1,200 to eight million families, will help shield people from rising prices.’
Alongside this tool, the government has also launched a new financial support and benefits checker tool. It enables people to answer 10 simple questions to find out what support they might be eligible for by cross-checking against 25 individual benefits and support offers. This should help people find out what support they may be eligible for that they may currently not be accessing and is part of the government’s drive to help people manage the increased cost of living.
This first version of the financial support and benefits checker tool includes a selection of benefits and other sources of financial support, such as childcare support, job seeker’s allowance, budgeting loans and housing benefit. However, it does not include information about pension credits which are underclaimed by an estimated 1.3m pensioners.
A wider range of options will be included in another version in the next few months.