- In April 2022 the Health and Social care levy comes into effect. This is a 1.25 percentage point increase on National Insurance contributions.
- The Chancellor had been under pressure to scrap the increase in the face of the rising cost of living issue.
- Instead, he opted to soften the blow by increasing the threshold at which people start paying National Insurance by £3,000 to £12,570.
In today’s Spring Statement the Chancellor announced a rise in the National Insurance threshold to £12,570, which will be welcome for those freelancers and side hustlers just starting out. But according to Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, those on lower incomes must also make sure they are not worse off when it comes to their pension entitlement.
“By lifting the threshold, care must be taken that workers earning less than £12,570 per year do not lose access to vital National Insurance credits for state pension,” said Morrissey.
“The state pension forms the backbone of most people’s retirement and therefore, they should ensure they do not incur gaps unnecessarily, which mean they end up with less in retirement.Many benefits come with automatic National Insurance credits.”
The pensions specialist explains that Child Benefit, Universal Credit and Job Seekers Allowance will credit you automatically. Other benefits such as statutory sick pay will give you credits if you apply for them. It is therefore vital people worried they may no longer be getting National Insurance credits to check to see what benefits they are entitled to, so these credits can be made.
A further option for people looking to plug gaps in their state pension record is to buy voluntary National Insurance credits, suggests Morrissey.
“Each missing year costs around £800 and will give you 1/35th of your entitlement. Over the course of retirement they can be a very good value way of boosting your state pension entitlement,” she said.
You should get automatic National Insurance credits if you receive the following benefits
- Universal Credit
- Jobseekers Allowance
- Employment and Support Allowance
- Maternity Allowance
- Child Benefit
- Carers Allowance
- Income Support
You may be able to claim National Insurance credits in these instances
- If you are unemployed and looking for work but not claiming Jobseekers Allowance, you can contact your Jobcentre to claim credits.
- If you are on Statutory Sick pay and you do not earn enough to make a qualifying year NIC, you can still claim. The same goes for statutory maternity, paternity or adoption pay.
- If you are caring for one or more sick or disabled person for at least 20 hours a week and you don’t claim Carers Allowance or Income Support.
- You are under state pension age and you look after a child under the age of 12 you may qualify for Specified Adult Childcare Credit.
For more information and how to claim go to National Insurance credits: Eligibility – GOV.UK (www.gov.uk)