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When National Insurance Credits can be claimed

National Insurance credits can help qualifying applicants to fill gaps in their National Insurance record. This can assist taxpayers to build up the amount of qualifying years of National Insurance contributions and thus increase the amount of benefits a person is entitled to receive, for example, the State Pension.

National Insurance credits are available in certain situations where people are not working and not paying National Insurance credits. For example, credits may be available to those looking for work, who are ill, disabled or on sick pay, on maternity or paternity leave, caring for someone or on jury service.

Depending on the circumstances, National Insurance credits may be applied automatically or an application for credits may be required. There are two types of National Insurance credits available, either Class 1 or Class 3. Class 3 credits count towards the State Pension and certain bereavement benefits whilst Class 1 covers these and other benefits such as Jobseeker’s Allowance.

There are usually no National Insurance credits available to the self-employed that need to pay Class 2 National Insurance or for older married women who chose to pay a reduced rate of National Insurance (pre-April 1977).

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When NIC credits can be claimed

National Insurance credits can help qualifying applicants to fill gaps in their National Insurance record. This can assist taxpayers to build the amount of qualifying years of National Insurance contributions, which can increase the amount of benefits a person is entitled to, such as the State Pension.

National Insurance credits are available in certain situations when people are not working and, therefore, not paying National Insurance. For example, credits may be available to those looking for work, who are ill, disabled or on sick pay, on maternity or paternity leave, caring for someone or on jury service.

Depending on the circumstances, National Insurance credits may be applied automatically or an application for credits may be required. There are two types of National Insurance credits available, either Class 1 or Class 3. Class 3 credits count towards the State Pension and certain bereavement benefits whilst Class 1 covers these as well as other benefits such as Jobseeker’s Allowance.

There are usually no National Insurance credits available to the self-employed that need to pay Class 2 National Insurance or for older married women who chose to pay a reduced rate of National Insurance (pre-April 1977).

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NIC after State Pension Age

If you have reached the State Pension age and continue to work in most cases, you no longer need to pay National Insurance Contributions (NICs).

At State Pension age, the requirement to pay Class 1 and Class 2 NICs ceases. However, you will remain liable to pay any NICs due to be paid to you before reaching the State Pension age. If you continue working, you need to provide your employer with proof of your age.

Your employer remains liable to pay secondary Class 1 employer NICs. If you would rather not provide proof of age to your employer, you can request a letter (known as an age exception certificate) from HMRC confirming you have reached State Pension age and are no longer required to pay NICs.

If you are self-employed, you will need to pay Class 4 NICs for the remainder of the tax year in which you reach State Pension age but will be exempt from the following year.

We can help you check if you think you may have overpaid NICs and arrange for a refund if an overpayment has occurred.

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National Insurance if you work abroad

If you move abroad, it can often be advantageous to continue paying your UK National Insurance Contributions (NICs) in order to preserve your entitlement to the UK State Pension and other benefits. If you are working in the European Economic Area (EEA), the rules depend on your situation (see below). The EEA includes all EU countries as well as Iceland, Liechtenstein and Norway. The same rules apply in Switzerland.

The rules are as follows:

  • If you work for an employer in the EEA: You will normally pay social security contributions in the EEA country you work in instead of NICs. This means you will be covered by that country’s social security laws and may be entitled to benefits, but your entitlement to benefits in the UK (for example State Pension) may be affected as there’ll be a gap in your NICs.
  • If your UK employer sends you to work in the EEA: You might be able to carry on paying NICs if you are abroad for up to 2 years. This means you won’t have to pay social security contributions abroad. There is a special form which your employer must complete to notify HMRC.
  • There are special rules if you are self-employed or working in two or more EEA countries (including the UK).
  • Some countries have a Reciprocal Agreement (RA) or Double Contribution Convention with the UK. These countries include the USA and Japan. You will usually pay social security contributions in that country instead of NICs.
  • For all other countries. You can usually continue paying NICs for the first 52 weeks you are abroad and if you meet the qualifying conditions.

Of course, depending on the Brexit outcome, the rules for EU/EEA countries could be open to change.

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When are Class 1A NICs due

Class 1A NICs are paid by employers in respect of most benefits in kind provided to employees, for example, the use of a company car. There are no Class 1A employee contributions payable.

Class 1A NICs are due in respect of most benefits provided to:

  • directors and certain other persons in controlling positions,
  • employees,
  • members of the family or households of the above.

Where a benefit is provided as part of a salary sacrifice or other optional remuneration arrangement (OpRA), special rules apply and the Class 1A NICs are calculated as a percentage of the relevant chargeable benefit.

Certain conditions must apply before Class 1A NICs are due. These conditions are that the:

  • benefit must be from, or by reason of, an employee's employment and must be chargeable to Income Tax under ITEPA 2003 on an amount of general earnings as defined at Section 7(3) ITEPA 2003;
  • employment must be 'employed earner’s employment' under social security law and employment as a director or an employee;
  • benefit must not already attract a Class 1 NIC liability.

There is a statutory exemption for qualifying trivial benefits in kind costing £50 or less. The tax-free exemption (and therefore exemption from Class 1A NIC) applies to small non-cash benefits like a bottle of wine or a bouquet of flowers given to employees. It also applies to any other BiK classed as 'trivial' that falls within the exemption. An annual cap of £300 is applicable to directors or other office-holders of close companies and to members of their families or households.

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Changes to the Employment Allowance

It was announced as part of the Autumn Budget 2018 measures that access to the Employment Allowance was to be restricted. From 6 April 2020, the £3,000 NIC Employment Allowance will only be available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

The draft legislation necessary to put this change in place has recently been published and is open for comment until 20 August 2019. The accompanying draft statutory note sets out the information requirements for employers claiming the Employment Allowance from April 2020. A final version of the regulations and guidance is expected to be published in October 2019.

There are currently a number of excluded categories where employers cannot claim the employment allowance. This includes:

  • Limited companies with a single director and no other employees;
  • Persons employed for personal, household or domestic work, such as a nanny or au pair (unless they are a care or support worker);
  • You are a public body or business doing more than half your work in the public sector;
  • You are a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary.
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Working past retirement age

There are many taxpayers who have reached the State Pension age and continue to work. In most cases they no longer need to pay any National Insurance Contributions (NICs).

At State Pension age, the requirement to pay Class 1 and Class 2 NICs on employed or self-employed earnings ceases. However, you will remain liable to pay any NICs that were due to be paid on earnings before you reached the State Pension age. If you continue working, you usually need to provide your employer with proof of your age to make sure you stop paying National Insurance. If you would rather not provide proof of age to your employer you can request a letter (known as an age exception certificate) from HMRC confirming, you have reached State Pension age and are no longer required to pay NICs. Your employer remains liable to pay secondary Class 1 employer NICs.

Certain jobs have a compulsory retirement age after which you are no longer allowed to work. An employer must have a good reason for setting a compulsory retirement age, for example, if there is an age limit set by law, or the job requires certain physical abilities. However, apart from these special circumstances there is no official retirement age and you usually have the right to work as long as you wish. There is also no requirement to provide your date of birth when applying for a new job.

If you are self-employed you will need to pay Class 4 NICs for the remainder of the year in which you reach State Pension age but will be exempt from the following year. We can help you check if you think you may have overpaid NICs and arrange for a refund of any overpaid NICs.

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NICs and termination payments

The National Insurance Contributions (NICs) Bill was introduced into Parliament on 25 April 2019. The Bill will see the introduction of a new 13.8% Employer Class 1A NIC charge on termination payments and sporting testimonials that are already liable to Income Tax from 6 April 2020. The government announced this change at Budget 2018.


This means that from next April, termination payments over £30,000 and sporting testimonials of more than the £100,000 limit will be subject to Employer Class 1A NIC charge. These changes will ensure that termination awards and sporting testimonials have the same Income Tax and NIC treatment. It will also close a commonly used loophole where employers disguise final payments as compensatory termination payments that benefit from the current NIC exemption.


The government had previously confirmed that the £30,000 tax free exemption on termination payments would be retained but that certain payments will no longer fall within the allowance. It is expected that any employer NIC ue on these termination payments will be collected in ‘real-time’, as part of the employer’s standard weekly or monthly payroll returns and remittances to HMRC.