Married Women Paying Reduced Rate National Insurance Contributions
National insurance for employees and employers
Some married women and widows pay a reduced rate of National Insurance as employees (of 5.85% in 2016/17 and 2015/16, rather than the full rate of 12%) between the Primary Threshold and the Upper Earnings Limit. No new elections are permitted. It is only likely to affect older women as the last date to make the election was 11 May 1977. It is important to check that the election is still appropriate and valid. The election is also effective for self-employment – exempting the holder from class 2 National Insurance liability.
If you have re-married, divorced or taken a career break, this could affect your National Insurance liability as your election to pay reduced rate National Insurance may have lapsed.
As a result of the election, you could be losing benefit rights. If the election has lapsed you could be running up a National Insurance debt.
Lost benefit rights
The reduced rate of National Insurance gives a right to only a 60% basic retirement pension based on the husband’s contributions. It does not give a right to contributory benefits or a state pension in one’s own right. As the election was made so long ago some women may have forgotten about the election or that it has these long-term consequences. The result can be an unpleasant surprise on retirement, or if the need arises to claim a contributory benefit. Anyone who thinks they may be in this position should look at the detailed guidance on the HMRC website link below.
You may also want to consider taking action in view of the new State Pension arrangements from April 2016.
The right to pay reduced rate contributions is lost on divorce, annulment or if, for two consecutive tax years an individual is neither self-employed or pays / is treated as paying class 1 contributions. In these circumstances there is a duty to contact the tax office and cancel the election. However, if this is not done, the individual could start to accrue a liability for underpaid National Insurance.
More detailed guidance on the married women’s reduced rate is available on the Gov.uk website: Reduced Rate National Insurance for Married Women.