Paying voluntary NI contribution to then pay tax on income...Thoughts please

sparkiemalarkie

Hello I'm due to receive my State Pension next year.
I'm currently due to get £158.63 per week.
If I pay 2.8 years voluntary contributions I can get £173.65 per week. (payment total approx £2153)
I already get 2 small teachers pensions Totaling £8843.28 pa
Paying the NI voluntary contributions will give me an annual pension of £17873 of which £5373 will be taxable
I can't seem to work out if it's worth if it's worth paying.
( missing years are 2018-2019 (0.8 missing) ,2019-2020, 2020-2021)
Any thoughts please?
sx

Dazed_and_C0nfused

In a full tax year you will be adding £15/week gross taxable income (£780).

All of this will be taxable at 20% (may differ if you are Scottish resident for tax purposes) so the net benefit to you is £624/year.

After four complete tax years you will have actually have received £2,496 and be £343 in profit.

Each and every subsequent £15/week will be 100% profit.

But you might get run over by a bus the day after you reach State Pension age.

molerat

Paying a one off £2153 will give you £15 per week, £12 after 20% tax, for the rest of your life.  You will get the outlay back in under 3.5 years.  A no brainer really.

sparkiemalarkie

Thanks so much for making it simple.... I had made it too complicated and got in a muddle.
sx

relishy57

I had a similar query to yours. I’m hoping to top up my shortfall post 2016 with additional payments and specified adult childcare credits. I will leave the payments as long as possible and try to avoid any buses.

meadow2018

We topped up my husband's NI contributions, he stopped working in 2013 due to illness and due to my earnings was not able to claim any benefits apart from PIP.  He became eligible for his state pension this year.  Due to being contacted out he needed 4 extra years contributions to get the full new state pension.  It was a no brainer pay the 4 years and got nearly £30 a week extra.

Be aware that the amount to be paid increases each year so the earlier you can pay the cheaper it is.

sparkiemalarkie

meadow2018 said:

Be aware that the amount to be paid increases each year so the earlier you can pay the cheaper it is.

Have you any idea how much it goes up by each year?
I've got an amount to pay for 2018-2019 ~ £629.95 with a warning of a poss price increase
but no price for 2019-2020 yet
sx

molerat

Contributions stay at the original year price for 2 years after the end of the year then rise to the price of the year in which they are paid.

18-19 is currently £14.65 per week and will rise in April 21 to the price for that year which will be this year's price of £15.30 + inflationary increase. You need 43 weeks so that will rise to somewhere in the region of £662.

19-20 is £15.00 per week, £780 for the full year.

20-21 is £15.30 per week, £795.60 for the year.

nigelbb

Dazed_and_C0nfused said:

In a full tax year you will be adding £15/week gross taxable income (£780).

All of this will be taxable at 20% (may differ if you are Scottish resident for tax purposes) so the net benefit to you is £624/year.

After four complete tax years you will have actually have received £2,496 and be £343 in profit.

Each and every subsequent £15/week will be 100% profit.

But you might get run over by a bus the day after you reach State Pension age.

On the other hand the average life expectancy at retirement age is over 20 years so that £15/week will be worth over £16,000 indexed linked.