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When you become an employee, depending on the salary that you earn, your employer will be able to calculate and deduct the correct amount of PAYE and National Insurance Contributions that you are due to pay to HM Revenue and Customs (HMRC). There may become a time where you are forced to come out of employment, maybe due to illness or some other circumstances which are out of your control. It is possible to preserve and maintain your National Insurance record by claiming tax credits. One fundamental reason behind making national insurance contributions is to enable you to qualify for the state pension and other state benefits at a later date. In each tax year (6 April - 5 April) a minimum amount of national insurance contributions have to be made in order for that year to be counted as a ‘qualifying year’. If you have had to leave employment and can’t quite make that year qualify, then these national insurance credits may be available to you and enable you to make that year a qualifying year which will qualify you for the state benefits. National Insurance Tax Credits Currently there are two main types of National Insurance credits that you may be entitled to. These are: - Class 1 – these credits count towards your entitlement to the basic State Pension and other state benefits - Class 3 – these count towards the basic State Pension and bereavement benefits only. To be eligible for these credits, you are required to be one of the following: - Unemployed, or unable to work because you are ill, and claiming certain benefits - On an approved training course - You are doing jury service - Been wrongly put in prison [There are many other circumstances in which you will be entitled to national insurance credits. These can be found on HMRC’s website.] Depending on your circumstance and eligibility, this will affect the type of credit you receive. For example, if you are doing jury service (as mentioned above) this entitles you to class 1 national insurance credits. If you do qualify for credits, you may receive the credits automatically. However, in some situations, you will not and will therefore have to apply for them. This is done by submitting a form to HMRC (there are several forms on HMRC’s website with each relating to a different reason as to why you are entitled to claim national insurance credits. If you would like more information about national insurance contributions/credits and how they affect your entitlement to state benefits, then please do contact Wisteria on 020 8952 0140 or email [email protected] where a tax specialist will be able to answer your questions. Alternatively please click here to contact us.
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