NI contributions - can't understand why not getting credits

TheGardener

"You're on the edge of the LEL so first thing is to check if your pension is salary sacrifice, if it is, try to get it changed, as it could be costing you NI credits. There should be an alternative, either "net pay" where contributions are deducted before tax but after NI, or RAS (relief at source) where you pay after tax/NI and the pension company claims basic rate relief.

Usually sal sac is good at it saves you NI, but in your case it's bad as it costs you NI credits, and at your level of income you won't pay any NI anyway." 
Ahh, now this is making sense  - I got a letter from my employer saying they'd had to change the way I paid into my pension so that I now paid into it from my take-home pay so I no longer pay less NI - that I am no longer in the SMART  - so I'm guessing that is the salary sacrifice bit which should save on tax (I think I'm taxed on the combined income of my pension and part-time job) But if I'm no longer getting the benefit of reduced NI - I'm still puzzled as to why I'm not getting more in my NI 'pot' ?

molerat

I'm still puzzled as to why I'm not getting more in my NI 'pot'

You get an NI credit for each week you earn more than £120.  If you work 52 weeks at £121 you would get 52 weeks credits. If your wages are variable any week where you earn in excess of £120 is added up at the end of the year and if it exceeds 52 x £120 you get a full year.  If you are paid 4 weekly with a wage of £121 per week but only work 3 weeks in that period you will not get credits as you have not reached the necessary £480 and that wage will not be put into the pot towards the 52 x £120 total requirement.  Your annual wage is very close to the minimum requirement so it is likely you have fallen below the minimums in some periods hence not getting full credits.

zagfles

TheGardener said:

"You're on the edge of the LEL so first thing is to check if your pension is salary sacrifice, if it is, try to get it changed, as it could be costing you NI credits. There should be an alternative, either "net pay" where contributions are deducted before tax but after NI, or RAS (relief at source) where you pay after tax/NI and the pension company claims basic rate relief.

Usually sal sac is good at it saves you NI, but in your case it's bad as it costs you NI credits, and at your level of income you won't pay any NI anyway." 
Ahh, now this is making sense  - I got a letter from my employer saying they'd had to change the way I paid into my pension so that I now paid into it from my take-home pay so I no longer pay less NI - that I am no longer in the SMART  - so I'm guessing that is the salary sacrifice bit which should save on tax (I think I'm taxed on the combined income of my pension and part-time job) But if I'm no longer getting the benefit of reduced NI - I'm still puzzled as to why I'm not getting more in my NI 'pot' ?

Because it looks like your earnings are often below the LEL. Look at your P60 and the NI part which gives "Earnings at the LEL" What does that say? That should equal a year's LEL if you were always paid at least the LEL every pay period. A year's LEL was £6240 last tax year, see the link I posted earlier for this year and previous years.

Earnings will mean gross pay minus any sal sac/"SMART" pension contributions. Other types of pension contributions don't reduce your income for NI.

The way NI credits is work is strange. You need to have total earnings at or above a year's LEL, but any pay period where you earn below the LEL doesn't count at all. So if you're paid 4-weekly, then for last year add all pay periods where you were paid at least £480, ignore any where you were paid less. If that is £6240 or more it's a qualifying year. If it's less then there's a shortfall of (6240-pay)/120 weeks and the cost of voluntary conts is the weeks x class 3 rate which for last year was £15.40