National Insurance Debts

Employees’ National Insurance is normally collected along with income tax paid under PAYE. National Insurance for the self-employed is normally collected along with income tax under self-assessment.

But there are a couple of occasions when you might receive a National Insurance bill.

1) National Insurance Deficiency notices.

This might happen if:

a. As an employee – if you have not paid National Insurance, or received National Insurance credits, for each week of a tax year in which you were an employee; or
b. You have been self-employed, but have not paid Class 2 contributions for each week of a tax year.

This might have happened because you have taken a career break, or because your earnings as an employee were below the National Insurance lower earnings limit in one or more weeks.

In such cases, HMRC may send you a National Insurance ‘deficiency notice’. This letter will tell you that you have not paid enough National Insurance to complete your contributions for a particular tax year. You will be invited to pay voluntary Class 3 contributions to complete your record for the year.

Although this is a bill, payment is voluntary. The decision to pay is essentially an investment decision. Before you make a decision you will probably want a state pension forecast (see State Pension Forecast on Direct Gov website). You may also want to contact HMRC on the Deficiency Notice Helpline 0845 915 5996 or textphone 0845 9153296. There is information on topping up your National Insurance record  on the HMRC website here: NIC topup.

2) You have been self-employed, but haven’t paid Class 2 National Insurance and don’t have a valid exception certificate.

This is only likely to happen if you have been self-employed for a long time or if you have had a certificate of exception for Class 2 National Insurance due to low earnings, and your earnings have gone over the limit.

In these cases, the National Insurance bill will need to be paid, though you may be able to arrange to pay by instalments. Exceptionally, if the bill is for years which are more than 6 years ago (5 years in Scotland) it may not be enforceable through the courts.