When do NIC contributions stop?

hall2056

Hi, I am currently 56, and planning on retiring on my 60th birthday. I am fortunate to have a DB pension, and current forecast, when I reach 60 is £40k per annum.(subject to RPI annual pay increases, not guaranteed).
My question is, what is my monthly net income, likely to be? I currently have a company car, and have a good annual income, 40% tax bracket. So is there a major difference between my monthly gross and net pay.

So my logic is that by not paying HMRC a large monthly sum for NIC contributions and company car tax, plus 40% tax, my monthly income won't drop dramatically. However this is on my assumption that I stop paying NIC contributions when I retire at 60, is my assumption correct?

I will start collecting my state pension at 67.
hall2056

HappyHarry

hall2056 wrote: »

Hi, I am currently 56, and planning on retiring on my 60th birthday. I am fortunate to have a DB pension, and current forecast, when I reach 60 is £40k per annum.(subject to RPI annual pay increases, not guaranteed).
My question is, what is my monthly net income, likely to be? I currently have a company car, and have a good annual income, 40% tax bracket. So is there a major difference between my monthly gross and net pay.

So my logic is that by not paying HMRC a large monthly sum for NIC contributions and company car tax, plus 40% tax, my monthly income won't drop dramatically. However this is on my assumption that I stop paying NIC contributions when I retire at 60, is my assumption correct?

I will start collecting my state pension at 67.
hall2056

You won't pay NIC on your pension income.

Your net income will depend on the tax rate and personal allowance at retirement. Assuming it's the same as next tax year:

£12,500 @ 0% tax (personal allownce)
£27,500 @ 20% tax = £5,500 tax

Net pay = £40,000 - £5,500 = £34,500 pa = £2,875 pm

Paul_Herring

However this is on my assumption that I stop paying NIC contributions when I retire at 60, is my assumption correct?

You stop paying NIC's when you either
- stop being employed, (what you appear to be describing) or
- you reach state pension age,

whichever comes first.

You'll still need to pay income tax on your pension however.

mgdavid

BUT you should consider your State Pension situation.

If you're not yet at the maximum (perhaps due to being contracted out for many years, implied by the DB pension) then you may want to pay voluntary NICs for a number of years to ensure you do receive the max SP.

xylophone

Check your state pension forecast.

https://www.gov.uk/check-state-pension

hall2056

Hi, I have checked my state pension forecast, and I have to pay for another 6 years to obtain full state pension. So, if as per my original post ( I stop working at 60), what is my best option:
A) continue to pay NIC contributions
B( make a lump sum payment, I.e. -the estimated 3 year shortfall

Hall2056

Paul_Herring

The 'cheapest' option is to continue earning sufficient wages to get yourself above the LEL[1] (£116/w, £503/m) for as long as you can, then top up any remaining years with lump sums.

A non-strenuous (either mentally or physically) part-time job after leaving your main job could suffice for the former.

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions