Raising the national insurance threshold could lead to the loss of vital credits, an expert has warned. As part of his spring statement, Chancellor Rishi Sunak said the threshold for National Insurance contributions would increase from £3,750 to £12,570 from July.
Aimed to help households weather the cost of living crisis, it means employees will keep more of what they earn before they have to start paying personal taxes. But it could impact people’s ability to access vital National Insurance credits for their state pension, the Daily Record warns.
The Chancellor had come under pressure to drop the increase in the face of the cost of living crisis. Instead, he chose to soften the blow by raising the threshold at which people start paying National Insurance.
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Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “The state pension is the backbone of most people’s retirement and therefore they need to ensure that they do not suffer unnecessary gaps, meaning they end up with less in retirement Many benefits come with automatic National Insurance credits For example Child Benefit, Universal Credit and Childcare Allowance job seeker will automatically credit you.
“Other benefits such as Statutory Sickness Benefits will give you credits if you apply for them. It is therefore essential that people who fear that they will no longer receive a National Insurance credit check see which benefits they have right, so that these credits can be granted.
“Another option for people looking to fill gaps in their state pension record is to buy voluntary national insurance credits. Each missing year costs around £800 and will give you 1/35th of your entitlement. During retirement, they can be a very good way to increase your pension entitlement.”
Automatic National Insurance credits apply if you have the following benefits:
- Job search allowance
- Employment and Support Allowance
- Universal Credit
- Family allowances
- Carer’s allowance
- Maternity allowance
- Income support
Who may be able to claim National Insurance credits
- If you are unemployed and looking for work but not applying for Jobseeker’s Allowance, you can contact your local Jobcentre to apply for credit.
- If you are on statutory sick pay and not earning enough to do an NIC qualifying year, you can still apply. The same applies to statutory maternity, paternity or adoption benefits.
- If you look after one or more sick or disabled people for at least 20 hours a week and you are not applying for care allowance or income support.
- You are under the statutory retirement age and you are caring for a child under 12, you may qualify for the Childcare Credit for Specified Adults.
See the government website here for more information and how to claim National Insurance credits and eligibility.