HMRC is contacting some self-employed individuals whose National Insurance records may contain gaps that could affect their State Pension entitlement.
If you receive a letter from HMRC, it is worth taking the time to review your position. In some circumstances, you may be able to make voluntary National Insurance contributions to fill missing years and potentially increase the amount of State Pension you receive in retirement.
The current HMRC exercise relates to certain people who were self-employed between 2015 and early 2024. HMRC estimates that up to 800,000 taxpayers could potentially be affected.
What should you do if HMRC contacts you?
If you receive a letter, we recommend checking your National Insurance position before deciding whether to make any payment.
In particular, check:
- Your State Pension forecast.
- Your National Insurance record.
- Whether there are any gaps in your qualifying years.
- Whether paying voluntary contributions would actually increase your State Pension entitlement.
You can check this information through your Personal Tax Account on GOV.UK.
You may not need to pay anything
Receiving a letter from HMRC does not automatically mean that you need to make voluntary National Insurance contributions.
For example, you may already have enough qualifying years to receive the full State Pension. In that situation, paying additional contributions may not provide any financial benefit.
It is therefore important to check your individual position before making a payment.
Why are these National Insurance gaps important?
National Insurance contributions can affect your entitlement to the State Pension. If you have missing qualifying years, making voluntary contributions can sometimes help you build up additional entitlement.
There are normally time limits on paying voluntary National Insurance contributions for previous years. However, as part of this particular HMRC exercise, some affected self-employed individuals may have an opportunity to address gaps going back to 2015-16.
For someone who is eligible and would benefit from additional qualifying years, making voluntary contributions could be a relatively cost-effective way of increasing their future retirement income.
Get advice before making voluntary contributions
Before paying voluntary National Insurance contributions, it is important to establish whether doing so will actually improve your State Pension entitlement and whether the cost represents good value for you.
If you have received a letter from HMRC and are unsure what to do, our team can help you review your position. We can look at your National Insurance record, consider the potential impact on your State Pension and help you understand whether filling any gaps is likely to be worthwhile.
If you would like help reviewing your National Insurance position, please get in touch with our London accountancy team.
