Up to 800,000 self-employed taxpayers could be affected by gaps in their National Insurance record that may impact their State Pension entitlement. HMRC have started writing to those potentially affected, offering an opportunity to review and correct missing qualifying years.
Most people need 35 qualifying years to receive the full new State Pension, and at least 10 qualifying years are generally needed to receive any new State Pension.
HMRC have started contacting thousands of self-employed individuals whose National Insurance (NI) records may contain gaps that could reduce their future State Pension entitlement.
- The letters are not payment demands.
- Instead, they give affected taxpayers the opportunity to fill missing qualifying years, potentially dating back to 2015-16, and improve their State Pension entitlement.
The issue mainly affects some people who Registered as self-employed between 2015 and early 2024 but were not correctly linked to HMRC's NI system.
- In many cases, individuals already had a Unique Taxpayer Reference (UTR) and began self-employment without completing a CWF1 registration form.
- The issue could arise even where the taxpayer completed the self-employed pages of their Self Assessment return.
- As a result, HMRC's records did not recognise that Class 2 NI Contributions (NICs) were due.
- HMRC have confirmed that the problem has been resolved from 2024-25 onwards.
NI record gaps may also have arisen where:
- Class 2 NICs were paid after the 31 January deadline.
- Payments were used first to clear outstanding tax liabilities rather than NICs.
HMRC estimate that around 800,000 taxpayers could be affected, including approximately 160,000 people who have reached, or are within two years of reaching State Pension age.
- Taxpayers closest to State Pension age are being contacted first, with further letters expected over the coming months.
HMRC have advised that no immediate action is required and that affected individuals will be contacted directly.
What should taxpayers and agents do?
Receiving a letter does not automatically mean there is a NI shortfall.
The first step is to check whether additional qualifying years are actually needed.
- Some individuals may already have enough qualifying years from employment or previous self-employment to receive the full State Pension, meaning further contributions would provide no additional benefit.
The easiest way to check a NI record is through the individual's Personal Tax Account (PTA).
- Within the PTA, taxpayers can view:
- Their State Pension forecast.
- Their NICs history.
- Agents cannot access a client's PTA or State Pension forecast, but they can:
- Help clients set up a PTA.
- Explain possible reasons for missing qualifying years.
Taxpayers should also check that any NI credits, such as those relating to caring responsibilities, have been correctly recorded, as missing credits could affect their qualifying year total.
If gaps are identified and additional qualifying years would increase State Pension entitlement, taxpayers can follow HMRC's instructions to make voluntary Class 2 NICs.
This HMRC exercise is unusual because it allows eligible individuals to fill NI gaps going back to 2015-16, which is beyond the normal six-year limit for voluntary contributions.
For some taxpayers, paying voluntary Class 2 NICs could be a relatively low-cost way of increasing their State Pension in retirement.
Useful guides on this topic
NICs Top Ups: National Insurance Contributions
Topping up NICs: when should you make additional National Insurance Contributions (NICs)? How do you check your NIC record? How to pay voluntary NICs? How to check your state pension entitlement?
National Insurance: What's the maximum payable?
How are National Insurance Contributions (NICs) limited? What is the maximum payable? What different rules apply to employment and self-employment income?
National Insurance: Rates
What are the current National Insurance rates? What rates will apply to next year?
Registering for Tax: Self-employment
You are self-employed, you have started working for yourself, what do you need to do now? How to register for tax. When do you pay tax? What records do you keep?
Personal Tax Account
What is a Personal Tax Account? How do I get one? What can I do with it?
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