Filling in a gap in National Insurance Contributions

DismayedOfUK

I need to fill in a gap in a my National Insurance record.  
I have to pay one year's worth of contributions to fill in a gap created several years ago.  At the time I was asked to help out with some training work and I set up a Limited Company to work through.  As it transpired, there really wasn't much work and I earned a grand total of £300 that year having spent much more than that to get up and running which was very disappointing.  Eventually I cut my losses, walked away and closed down the Ltd Company.
Now I have to pay National Insurance for that year and I've been told that I wasn't "Self employed" because I had a limited company so I have to pay Class 3 contributions instead of Class 2 because it means I was "employed".  This will cost me £824 as opposed to £168 if they were Class 2.  What's more, I'm told that Class 3 contributions don't count towards benefits if I ever need them.  If I was actually employed, I'm pretty sure I wouldn't have to pay for that year because my earnings were so low yet I'm having to pay nearly three times my gross income for that period just in NI because it's considered that I was employed.
So my question is, do I really have to pay £824 in National Insurance because I earned £300? The good thing is that paying this will get me back on track to have the right number of years of contributions when I reach retirement age.  It just seems the wrong amount to be paying.  
Does anyone else have experience of this and, if so, can you provide me with some advice? 

molerat

You do not have to pay anything but if you want to pay voluntarily then class 3 is correct if you were not registered self employed.  It has nothing to do with how much you did or did not earn.

Are you sure that particular year will add value to your pension ?

Do you really need to pay it, is it that important in the overall picture ?

What is your amount at April 2022 ?

Which financial year do you reach state retirement ?

p00hsticks

You don't NEED to fill it. Voluntary NI contributions are , as the name suggests, purely voluntary.
However, for people who are short of the years necessary to maximise their state pension and with no other way of getting them, buying them represents very good value for money if yo uhave average life expectancy. 

You're not being asked to pay class 3 because you were employed - that's the default Class to pay unless you are were registered for self-employment and qualify to pay the lower Class 2. I pay Class 3 with no incme at all. 

Are you sure that you actually filling that particular year will increase your State Pension forecast ?
And is there no other cheaper way of reaching the maximum (e.g. are you still working ?)
If you post up the details from your State Pension forecast people will be able to tell you if the year is likely to be worth buying. 


Check your State Pension forecast - GOV.UK (www.gov.uk)

• Maximum amount of forecast
• Current amount up to April 2022
• Years you have available going forward until you reach State Pension Age
• Number of full years prior to April 2016
• Number of full years after April 2016
• Years which are not filled
• Whether there is a COPE mentioned and if so what the amount is (this will show by clicking a link there is a statement along the lines of ' like many, you have been contracted out.....'.)

DismayedOfUK

Thank you both.  I've learned a lot here.  Adding that year will make a difference to my state pension of about £10/week so, provided I live more than 83 weeks after reaching retirement age (currently in 2038) I'll be in "profit" (ignoring the time value of money!) so I'll do my best.
I did my pension forecast as per the link and the most I'll get on my state pension is £185/wk if I fill in this gap. Currently I'll be getting £175 if I make all necessary contributions up to that point. Based on my contributions to date (I moved overseas for a bit so stopped paying them here), I'll get £91.02/wk so it's worth chipping away at it.
I don't know anything about COPE but our financial advisor is going to look into it.

My main concern now is that, having spoken to someone yesterday, it's generated a bill of £824 that's winging its way to me in the post. Am I likely to get fined if I don't pay that now it's been generated?  Thing is, I've had a few years of simply not earning as I had to rebuild our house when we moved back to the UK and it was cheaper to do the work myself in lieu of a job (and more fun!) rather than get a builder in...so I'm wondering if there's a cheaper way of paying something for those years if that's even possible instead of paying that one year where I had the stupid limited company...If anyone's read this far, firstly, thank you and secondly, I'd be very appreciative of any thoughts/resources you may have on this...  

molerat

Adding that year will make a difference to my state pension of about £10/week

One year can only add a maximum of £5.29 (maybe £4.73 or even £0.00).

My main concern now is that, having spoken to someone yesterday, it's generated a bill of £824 that's winging its way to me in the post.

It is not a bill, purely a payment reference, you don't have to do anything about it.

so I'm wondering if there's a cheaper way of paying something for those years if that's even possible

The only option if you were not registered as self employed is class 3

I don't know anything about COPE but our financial advisor is going to look into it.

A bit further down your forecast will be a section about contracted out pensions, if you were in one, with a click link to the COPE. If there is no mention of contracted out you were not so no COPE.  Depending on how good your FA is on the SP he may well give you a blank look when you mention COPE

You mentioned overseas, are any of those years 2006-07 and onwards and showing as gaps in your forecast, you may be able to pay class 2 for them.

Those points asked for above will give us a chance to do a full assessment of what your SP forecast means and lay it out in simple terms

Current £££.pp amount accrued up to April 2022
Number of pre 2016 NI years full
Number of post 2016 NI years full
Tax year you reach state retirement
Any COPE amount shown
Years which show not full and prices