Class 3 NI - Full or part year?

BoxerfanUK

Hi all,

I'm 60 and retired. State pension starts in 2025 and I started paying class 3 last month due to being contracted out most of my working life.

To 5/4/19 my forecast is £157.01 pw and the max' I can get is £168.60 pw (COPE estimate £101.63 pw)

Paying class 3 for this and the next tax year will credit me with another £9.64 pw at today's state pension rates so by the start of the new tax year in 2021 I will have a shortfall of only £1.95 pw on state pension.

My question is; if I wanted to be credited with that last £1.95 pw will I still have to pay class 3 for the FULL tax year in 2021/22, or would I only have to pay for part of that year?

If I have to pay for the full year I'm wondering whether it's worth it as I'd have to draw SP for nearly 8 years @ £1.95 pw just to recoup that last years class 3, by which time I'd be nearly 74 !

OldBeanz

It is only full years that count. If you live until pension age you are likely to live into your eighties so still a bargain.

Tom99

Will you pay tax on the £1.95? If so slightly longer that 8yr payback.

BoxerfanUK

Tom99 wrote: »

Will you pay tax on the £1.95? If so slightly longer that 8yr payback.

Thanks both. That's a very good point Tom99 I hadn't thought of that. Yes I'll pay 20% tax on all of my SP so in that case payback lengthens to 9.6 years to age 75.5

Taking it a step further, if I saved the £780.00 instead and only earned 1.5% interest over 9.6 years that would take the payback to just over 11 years to age 77 :(

Hmmmm, maybe I will maybe I won't :rotfl:

squirrelpie

I'll pay 20% tax on all of my SP

That would be unusual since HMRC normally allocates most of your Personal Allowance to the State Pension payments.

BoxerfanUK

squirrelpie wrote: »

That would be unusual since HMRC normally allocates most of your Personal Allowance to the State Pension payments.

Hi squirrelpie, sorry perhaps I didn't phrase that correctly. I know the state pension is paid direct and free of tax but as I'm in receipt of a DB pension considerably in excess of the personal tax allowance anyway, when I come to draw SP my tax code applicable to my DB pension will effectively be reduced by the full amount of my SP amount anyway, so, indirectly that £1.95 will be still taxed anyway.