Social Security

Do I need to pay National Insurance when I leave my job?

How much does National Insurance cost?

What happens if I don't pay?

How do I keep up my contributions?

Everyone who works for an employer and is paid over an amount set by government each year (the Threshold Limit,) pays National Insurance contributions. They accumulate in each tax year and once sufficient have been paid the year counts as a ‘qualifying year'. National Insurance is paid on earnings over the Threshold Limit.

Each qualifying year counts toward your State Pension and also entitles you to Jobseekers Allowance and Incapacity Benefit. For details of how to qualify for these benefits go to the Social Security index. Self employed people pay a flat rate contribution each week but these do not qualify you for Jobseekers Allowance.

If you are a married women still paying a married woman's reduced contribution, this does not entitle you to any benefits so it is worthwhile checking whether changing to full contributions could enhance your State Pension position. Go to the State Pension pages via the Social Security contents pages to find out more.

Do I need to pay National Insurance when I leave my job?

In the tax year in which you leave work you may have contributed enough to complete a qualifying year. If this is the case you do not need to pay any more or sign on for credits for the rest of the tax year. But see Jobseekers Allowance (via the Social Security contents page) to check whether there may be other reasons to sign on.

You will have paid sufficient contributions if the gross salary you have been paid over at least a three month period has exceeded a fixed amount. Click here to see the amount for this tax year. (The three month period is important because there is an upper salary limit beyond which contributions are payable at a reduced rate).

If you are unsure whether you have paid enough contributions in a tax year, it is worth contacting the Contributions Office of HMRC six months after the end of the tax year to enquire.

If you are a man, you are not working and are resident in the UK for at least six months of each tax year, you will be credited automatically with full contributions from the current women's state pesnion age until you are 65.

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How much does national insurance cost?

For State Pension purposes it may be necessary to get more qualifying years to maximise your entitlement.

Although there is no legal requirement to pay unless you are working, each year you do not pay can reduce your State Pension by about 3%. If you do not pay for about two years you may run out of entitlement to Jobseekers Benefits.

If you are a married man or in a Civil Partnership your partner's pension may be affected if you do not get a full pension. Any Bereavement Benefits may also be reduced if you do not have the full amount.

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What happens if I don't pay?

For State Pension purposes it may be necessary to get more qualifying years to maximise your entitlement.

Although there is no legal requirement to pay unless you are working, each year you do not pay can reduce your State Pension by about 3%. If you do not pay for about two years you may run out of entitlement to Jobseekers Benefits.

If you are a married man or in a Civil Partnership your partner's pension may be affected if you do not get a full pension. Any Bereavement Benefits may also be reduced if you do not have the full amount.

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How do I keep up with my contributions?

You have four options;

Work as an employee or become self employed and pay contributions on your income. If you work you will have to pay as long as your income is above the lower threshold limit.

Sign on for Jobseeker's Allowance. Credits are given on a week by week basis for as long as you satisfy the conditions. You would need 52 weeks of credits to give you a full qualifying year.

Claim Employment and Support Allowance if you go sick. Credits are given weekly as in Jobseeker's Allowance.

Pay Class 3 Voluntary Contributions on a weekly basis. You can apply to the Contributions Office of HMRC to pay contributions by bankers order or you can pay them as a lump sum to top up if you have paid only a few contributions in the year.

Is it worth while paying class 3 Contributions?

Class 3 contributions to build up your pension. You will have to pay the contribution for the whole year, either as a monthly standing order or in a single payment. In the 2011/2012 tax year the payment is £12.60 per week or £655.20 for the year. Each full year paid buys an additional 1/30 of the current Basic Pension up to the maximum. You cannot get more than 100% by paying extra.