25 June 2024 , 10:41
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Martin Lewis and his panel of experts addressed the nation's top tax worries this week on the The Martin Lewis Podcast. Joined by “tax deity” Rebecca Benneyworth, the pair discussed one viewer’s peculiar question regarding the upcoming National Insurance drop.
While talking about the voluntary National Insurance system, Rebecca urged Brits who are planning to top up their National Insurance record to do so before January 31. She explained: “Otherwise you miss the cut-off and you won’t get that year’s pension credit.
"That’s really really important. Sometimes people (say); ‘Oh no can’t get around to it, it’s only a little bit of interest’ but that is the absolutely crucial date.”
National Insurance contributions were cut by two percentage points in April, with class one dropping from 10% to 8% and class 4, or the self-employed National Insurance, lowering to 6%. All-in-all, the changes have allowed Brits to keep more of their income with a lower tax rate.
However, Martin’s listener questioned if this would also reflect in the rates for those buying their National Insurance credits. These credits are vital to access state pension and Pension Credit benefits. Brits need a minimum of 35 qualifying years of National Insurance credits and can buy voluntary class three or class two credits to fill any gaps in their record.
The listener queried: “With the lowering of the National Insurance rate, those of us with missing National Insurance years or who will have in the future, will it cost less to buy those missing years?” Kari Mellon, founder of Opes Tax, noted that the rate for class three voluntary National Insurance credits has not changed despite the tax cut and Rebecca agreed saying: “No it hasn’t, it’s a flat £15 something.”
Self-employed Brits have just weeks left to submit tax return or risk £100 fine
Martin noted that Brits pay roughly £800 a year for voluntary National Insurance credits and grew frustrated as he pointed out some of the faults in the system. Referring to a type of National Insurance that has since become defunct, replaced by class four credits, he said: “The corollary of this is class two, which many people no longer have to pay, which is if you’re self-employed it too was a £3 a week type charge.
“If you still want to pay that on a voluntary basis you can pay that £3 a week even though those who had to compulsory pay it don’t pay it any more.” Rebecca grimaced at the inconsistencies, saying it’s a “perverse system”.