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, for example:

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 0300 200 3503. There is information on the Gov.uk website on making voluntary contributions here.

2) You have been self-employed, but haven’t paid Class 2 National Insurance.

This is only likely to happen if you have been self-employed for a long time.

If you are liable to pay class 2 and have not paid, 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.

For more information, see the HMRC website:

Application of statute limitation  – http://www.hmrc.gov.uk/manuals/dmbmanual/DMBM595080.htm

Calculation of the six year limit –  http://www.hmrc.gov.uk/manuals/dmbmanual/DMBM527120.htm