Like many people, over the past few years I became self-employed to make a living. I am now about to go back in to employment as it should offer more security and related benefits, such as life insurance and healthcare.
However, over the past four years I haven’t paid any national insurance as my earnings have been so low. Would I be wise to contact HMRC and offer to pay national insurance to cover the past four years, now that I can afford it? I am 40, and was paying for the 14 years prior to becoming self-employed. IJ, Edinburgh
This is slightly outside our normal remit, so we asked an expert, the excellent Lesley Fidler, who works at the London-based accountants and experts on all matters tax, Baker Tilly.
She says: “No one knows how the state pension will be organised in more than a quarter of a century’s time but if the current rules apply your state retirement age will be 67. You will need 35 years’ contributions to qualify for a full state pension. So if you anticipate being employed for another 21 years, there is no need to make up any past years. But if you’d like the security of knowing you have 18 of your 35 years ‘banked’, and if HMRC knew about your self employment, you could pay £2.75 a week for each of the missing four years.”
She says that £572 would get you 4/35ths of the full state pension for life after retirement, “which is a better return than many other investments”.
You’ll have to do the sums and work out how it relates to your circumstances, but, on balance, it looks as though it’s probably worth doing – if you’ve got the money, of course.
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