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    Time could be running out to increase your pension pot

    In order to qualify for a full State Pension, you will need a complete National Insurance (NI) record of 35 years or a minimum of 10 qualifying years to be entitled to any amount.

    There are various ways you will build up your entitlement, the main ones being:
    -Whilst you work and pay NI contributions
    -Receiving NI credits
    -Paying voluntary NI contributions

    You are able to attain a forecast of your state pension and a copy of your NI record through the Government Gateway, this will provide information on the State Pension you have accumulated to date and any extra NI credits that are needed in order for you to receive the full State Pension entitlement.

    Voluntary contributions

    If you find there is a shortfall in your NI contributions, there is the option to make voluntary contributions to fill any gaps in your NI record. This is usually only possible for gaps during the previous six years.

    However, there are certain extensions available to the six-year timeframe but only until 5 April 2023; so, if applicable to you, prompt action is advised. Until this date, men born after 5 April 1951 and women born after 5 April 1953 are able to pay voluntary contributions for any eligible gaps between the tax years April 2006 and April 2016. This essentially provides a potential window of 16 years for which to make up any shortfalls.

    The cost to fill in gaps in an NI record are up to £3.15 per week for class 2 contributions (£163.80 per annum) or up to £15.85 per week for class 3 contributions (£824.20 per annum). It is clear to see the benefit of making these contributions, given that each additional qualifying year equates to an extra £275.08 of State Pension benefit. Voluntary payments can be made as a one-off payment, by quarterly or monthly instalments.

    What should I do?

    If you think you could potentially miss out on utilising your voluntary contributions based on the above information, it is important that you seek clarification from an expert financial planner as soon as possible. With specialist advice, you can ensure you make the most of the potential benefit before the end of this tax year when the window of opportunity will be reduced to the previous six years for everyone.

    Get in touch with a member of our financial planning team today to discuss your personal circumstances by emailing enquiries@pmm.co.uk or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    National Insurance thresholds are set to change from 6 July – are you prepared?

    The Primary Threshold (PT), the level at which employees begin paying National Insurance contributions (NICs), is set to increase to £12,570 from 6 July 2022 – a move designed to lessen the impact of the Government’s decision to increase NIC rates by 1.25 percentage points in April 2022.

    This rise will bring the rate in line with the current personal allowances for income tax, therefore, those earning below this amount will pay no tax or NICs. Many people should see benefit from the cut to their NICs as a larger proportion of an individual’s income will be free of the charge – something which will be welcomed given the current cost of living crisis alongside rising inflation.

    What does this mean for those who are self-employed?

    Alongside the increase to the PT, the Lower Profits Limit (LPL), the point at which self-employed individuals start paying Class 4 NICs, will also be increased to £12,570.

    By increasing the LPL, Class 2 NICs liabilities are also reduced to nil on profits between the Small Profits Threshold (SPT) and LPL, ensuring that no one earning between the SPT and LPL will pay any Class 2 NICs, but will continue to accrue National Insurance credits.

    Will employers’ contributions change?

    The Secondary Threshold, the point at which employers must start making contributions, remains unchanged at £9,100 per year. This means that employers will continue to pay NICs for all employees once they earn £9,100 and over.

    Has the threshold for Directors increased?

    As Director’s in limited companies pay NICs on an annual basis, they are calculated using annual earnings rather than what they earn in each pay period. For 2022-23, the PT rate of £11,908 will apply, If you are a director, it may be worth reassessing your remuneration strategy following NI changes and increasing dividend tax rates to ensure you are minimising your tax burden.

    Get in touch

    To accommodate the NIC threshold increase, payroll software, including HMRC’s Basic PAYE Tools, will need to be updated before processing and reporting any payments on or after 6 July 2022.

    For more information on the NIC increase, or any other payroll requirements, please get in touch with payroll director, Julie Mason, by clicking the button below.