Urgent Guidance Needed - State Pension, NICs & HMRC

Rinchen

I am 53 and have spent weeks shuttling between the Future Pension Centre, HMRC, CAB, etc. helplines trying to arrange a state pension. There have been multiple instances of incorrect and directly contradictory advice and information given within and between these departments. I registered before the DWP deadline in April 2025, and the FPC confirmed that all available years since 2008 would count towards my pension. I currently have 6 qualifying years towards a state pension and no private pension. I have 14 payable years of self-employment left until retirement and plan to pay all the Class 2 NICs for those years. I need to cover 15 extra years to qualify for a full state pension, which I want to do if at all possible. Except for 8 months of employment (2007-8), I have been self-employed. I have only earned above the tax threshold twice in my life, and I paid the required taxes immediately both times. 

At first, the HMRC said that, given my 'liabilities ended in 2015', I was 'eligible to pay Class 2 NICs since then'. However, on a supposedly final call, just as we were calculating the amounts to generate the 18-digit payment code to cover the credits for the remaining years, the HMRC agent suddenly asked why tax returns had not been filed for most of the years from 2017 onwards. Despite earlier assurances about my Class 2 eligibility, they now said the reason given for this situation will determine whether I can pay Class 2 contributions or if the Class 3 rate will apply. 

I didn’t file returns for those years due to low earnings which were below the tax liability threshold. I have never earned enough to cover a private accountant, and completing these tax returns has been extremely stressful and time-consuming. It typically takes me about a week to finish each one. I also did not realise the link between submitting tax returns (whatever level of income is generated) and Class 2 eligibility. I was also travelling for some months (mainly in Spain, the US & S. Africa) supporting myself through supplementary work (freelance translation) while keeping my tax base in the UK. 

Given this situation, I have several questions: 

What reasons are HMRC looking for as valid reasons for not filing a tax return? 

What process ensues after a valid reason is provided in terms of the proof required? 

If any years fall in the Small Earnings Exception, would that disqualify me from paying Class 2 NICs? 

Would even mentioning the matter of missing tax returns risk penalties (even though I didn't owe any tax), making the safest option to simply pay Class 3 NICs without question? 

Is it correct that, even if the far higher Class 3 rate applies, given my overall situation, it is worth paying for as many missing years as I can afford, as suggested by Martin Lewis (who notes that they pay for themselves in 2.5 years)?

Thank you in advance for your consideration of this enquiry.

Any guidance you can provide would be greatly appreciated.

Marcon

Rinchen said:

At first, the HMRC said that, given my 'liabilities ended in 2015', I was 'eligible to pay Class 2 NICs since then'. However, on a supposedly final call, just as we were calculating the amounts to generate the 18-digit payment code to cover the credits for the remaining years, the HMRC agent suddenly asked why tax returns had not been filed for most of the years from 2017 onwards. Despite earlier assurances about my Class 2 eligibility, they now said the reason given for this situation will determine whether I can pay Class 2 contributions or if the Class 3 rate will apply. 

I didn’t file returns for those years due to low earnings which were below the tax liability threshold. I have never earned enough to cover a private accountant, and completing these tax returns has been extremely stressful and time-consuming. It typically takes me about a week to finish each one. I also did not realise the link between submitting tax returns (whatever level of income is generated) and Class 2 eligibility. I was also travelling for some months (mainly in Spain, the US & S. Africa) supporting myself through supplementary work (freelance translation) while keeping my tax base in the UK. 

If you registered to file online, then it's hard to understand how it could take you a week to complete a tax return. If you were still doing the paper version, it's becomes considerably more understandable - although unfortunately that isn't a valid reason.

The simplest acceptable answer to why you didn't file a tax return is because you didn't need to - but that one only washes if it's true. Deciding off your own bat that it's too much hassle and (fingers crossed) should be OK isn't quite the same thing. Did HMRC contact you for any of the missing years to say you needed to file one? 

Reading this might help you understand a bit more: https://www.litrg.org.uk/tax-nic/how-tax-collected/self-assessment-and-tax-returns/who-should-complete-tax-return

sheramber

Not submitting  tax returns  and ‘travelling” could imply you were not self employed in those years. In which case you would not be entitled to pay class2 NIC.

Rinchen

Thank you both for your responses, which I appreciate. 

Marcon - Please can you clarify what you mean by 'The simplest acceptable answer to why you didn't file a tax return is because you didn't need to - but that one only washes if it's true.'

In answer to your query, HMRC never contacted me to say I needed to file a return; otherwise I would certainly have done that. 

Sheramber - Apologies as my initial phrasing gives a wrong impression. I wasn't travelling as such - it was a case of doing the freelance work I would have done in the UK, just temporarily in a different location. One of the trips was to undertake a relevant training I could only do in that location. The other trip was an all-expenses-paid trip to visit a leading Center and attend a job interview in the US.   

I'd appreciate any further responses you may contribute. 

Many thanks again for your valued help. 

DRS1

Did you check the link posted by @Marcon?  Does that tell you if you needed to file a self assessment return for any years you missed?  If you read that and say I did not meet the criteria for submitting a return then that would be an acceptable answer for the Revenue.  But it does seem the bar is very low for the self employed.

Sometimes the Revenue write to you if you have been filing a self assessment saying either you don't need to do one or check if you still need to do one and let us know if you don't.  They have been keen to stop people doing it for some reason.  As you were submitting self assessment returns before did you get such a letter from HMRC?  If so that might be an answer you could give now.

How did you actually leave it with the man from the Revenue?  He asked why you had not submitted returns so what did you say?

Marcon

Rinchen said:

Thank you both for your responses, which I appreciate. 

Marcon - Please can you clarify what you mean by 'The simplest acceptable answer to why you didn't file a tax return is because you didn't need to - but that one only washes if it's true.'

In answer to your query, HMRC never contacted me to say I needed to file a return; otherwise I would certainly have done that. 

It really is a remark intended to be taken at face value ie "I have never filed a return because I didn't need to".  The fact you've filed returns in the past indicates you knew you had to do so, and if HMRC haven't confirmed that requirement no longer applies, it's hard to see why they haven't chased you.

How about something along the lines of:

'I didn’t file returns for those years because I had been led to understand that I no longer needed to do so. I had very low earnings which were below the tax liability threshold for all the years in question. I cannot now trace HMRC's formal confirmation that this was the case, but I can confirm that I have not received any reminders or other correspondence from HMRC asking me to submit returns for 2017 onwards.'

Rinchen

Thank you both DRS1 and Marcon. 

I shall go through the link/webpage and additional information I have received from an agent at Money Helper Pension Department, as well as review my records carefully. 

I definitely didn't receive any paperwork from the HMRC, as I've always responded in a timely way to all of their communications. 

To DRS1's question, I said I'd have to check my records. The person said, 'You can check them now,' and I responded, saying the truth, which was that I was calling from a remote location without any access to my records, so I'd call again as soon as possible. 

Marcon's suggestion is appreciated as a potential way forward. 

I also need to check whether the Small Earnings Exception category makes you liable for Class 2 NICs or Class 3 as the wording on the website is vague and leaves the situation unclear. 

What do you make of HMRC repeatedly telling me, in every phone call except the last one when I made the final payment, that since my liabilities ended in 2015, I was 'eligible to pay Class 2 NICs from that point onward'?

Marcon

Rinchen said:

What do you make of HMRC repeatedly telling me, in every phone call except the last one when I made the final payment, that since my liabilities ended in 2015, I was 'eligible to pay Class 2 NICs from that point onward'?

That would seem to make sense, but I'm no expert on NI. I can't add to the information in the link I've given above - they are far better informed than I am. 

sheramber

Rinchen said:

Thank you both DRS1 and Marcon. 

I shall go through the link/webpage and additional information I have received from an agent at Money Helper Pension Department, as well as review my records carefully. 

I definitely didn't receive any paperwork from the HMRC, as I've always responded in a timely way to all of their communications. 

To DRS1's question, I said I'd have to check my records. The person said, 'You can check them now,' and I responded, saying the truth, which was that I was calling from a remote location without any access to my records, so I'd call again as soon as possible. 

Marcon's suggestion is appreciated as a potential way forward. 

I also need to check whether the Small Earnings Exception category makes you liable for Class 2 NICs or Class 3 as the wording on the website is vague and leaves the situation unclear. 

What do you make of HMRC repeatedly telling me, in every phone call except the last one when I made the final payment, that since my liabilities ended in 2015, I was 'eligible to pay Class 2 NICs from that point onward'?

Was 2015 the last year you paid NIC?

What years are covered by the 6 years you have credited.? 

Rinchen

Thanks for your response, Sheramber. I haven't been able to establish which exact years the NICs have been paid, as the status records I have been given are not straightforward, and also, a great deal of information that I have received has turned out to be incorrect and directly contradictory on further investigation. I am perplexed as to why all but one of the HMRC advisers confirmed Class 2 NICs would be payable, and only during the final call, just as I planned to make the payment, was the matter of tax returns suddenly raised. There seems to be no way of knowing how to proceed or any clear way forward in finding a resolution. I am concerned that penalties will be levied for some unforeseen clause or omission, despite my having acted to the best of my knowledge at each stage. I only have a week to finalise the whole matter.      

DRS1

Usually people are told to check their Personal Tax Account to see what years of NICs have been paid or credited.  There is a box for NICs and the State Pension.  It seems odd that you should have contradictory information (from different sources? or the same people saying different things at different times?).  Are you able to check your Personal Tax Account?  It is a page on Gov.uk but you have to have registered to get access.