HMRC contacting self-employed people over National Insurance gaps

HMRC is contacting some self-employed people after identifying potential gaps in their National Insurance (NI) records which could affect their future State Pension.

The issue relates to some individuals who were self-employed between 2015 and early 2024, with HMRC estimating that as many as 800,000 taxpayers could potentially be affected.

If you receive a letter from HMRC, it's important not to ignore it. However, receiving one doesn't necessarily mean you need to make additional National Insurance contributions.

Why is HMRC contacting people?

Your National Insurance record plays an important role in determining your entitlement to the State Pension.

Gaps in your record can mean that certain years don't count as qualifying years, potentially reducing the amount of State Pension you're entitled to receive.

HMRC's current exercise is designed to alert affected individuals so they can check their records and, where appropriate, consider making voluntary National Insurance contributions to fill missing years.

In some cases, it may be possible to fill gaps going back as far as the 2015/16 tax year.

What should you do if you receive a letter?

Don't automatically assume that you need to make an additional payment.

Instead, start by checking:

• Your current State Pension forecast

• Your National Insurance record

• Whether you have any missing or incomplete qualifying years

• Whether filling those gaps would actually increase your State Pension entitlement
  

You can check your National Insurance record and State Pension forecast through your Personal Tax Account on GOV.UK.

Don't pay voluntary contributions unless you'll benefit

This is particularly important.

A gap in your National Insurance record doesn't necessarily mean you'll receive a lower State Pension.

Depending on your circumstances, you may already have enough qualifying years to receive the full State Pension. If that's the case, paying voluntary National Insurance contributions to fill additional gaps may provide no financial benefit.

Before making a payment, it's therefore important to establish whether filling a particular year will actually increase the pension you're likely to receive.

Why could this be an important opportunity?

There are normally time limits on how far back you can go when making voluntary National Insurance contributions.

However, HMRC's current exercise could give some affected self-employed individuals an opportunity to correct gaps potentially dating back to 2015/16.

Where making additional contributions does increase your entitlement, filling a gap could potentially provide a valuable increase in retirement income relative to the amount contributed.

The key is to check your individual circumstances before deciding whether to pay.

Received a letter from HMRC?

If you've received a letter about gaps in your National Insurance record, don't panic – but don't put it to one side either.

Check your NI record and State Pension forecast first and establish whether you have any gaps that need attention.

Most importantly, don't assume that making a voluntary contribution is automatically the right decision. Whether it's worthwhile will depend on your existing National Insurance history and expected State Pension entitlement.

If you've received a letter from HMRC and you're unsure what to do next, speak to the team at SJC, Chartered Accountants. We can help you understand your position and determine the appropriate next steps.