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  • FIRST POST
    • pochisoldi
    • By pochisoldi 12th Jan 18, 1:15 PM
    • 181Posts
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    pochisoldi
    Earning NI Qualifying years - working part of the year
    • #1
    • 12th Jan 18, 1:15 PM
    Earning NI Qualifying years - working part of the year 12th Jan 18 at 1:15 PM
    Do I actually need 52 individual weekly/12 individual monthly pay packet's worth NI contributions to make a full year?

    Given that according to https://www.ifs.org.uk/bns/bn105.pdf, A qualifying year is defined as "a tax year since 1978Ė79 in which an individual paid (or is credited as having paid Ė see Section 3.2.2) class 1, 2 or 3 NI contributions on earnings of at least 52 times the LEL"

    52x LEL is £5876pa for 17/18.

    So far I've paid about £2700 in NI on gross earnings of £33k.

    Does this mean that for me, 2017/18 is in the bag, and I don't need to worry about getting an NI credit/making further contributions for the rest of this tax year? (given that I've been made redundant and there's a chance that I won't be paying any class 1 NI in Feb or March).

    PochiSoldi
    (quietly ignoring the fact that a director's contribution period is the whole year, because it doesn't apply to him)
Page 2
    • nigelbb
    • By nigelbb 14th Aug 19, 9:25 AM
    • 2,791 Posts
    • 3,533 Thanks
    nigelbb
    As someone who gets their State Pension in this NI/Tax Year March 2020 but will pay 11 months not 12 NI. I am really surprised that it cannot be worked out, even pro rata, if need be, to allow these 11 months towards a contracted out year/part year for SP.
    Originally posted by GibbsRule No3
    None of the contributions are counted in the year that you become eligible for the state pension. With a March birthday you will lose out by this system whereas those who have a birthday in April are the winners.
    • intalex
    • By intalex 25th Oct 19, 9:48 AM
    • 380 Posts
    • 67 Thanks
    intalex
    Just to clarify this even further, the quickest way to a qualifying year in 2 months is as follows:
    M1 - Earn a minimum of: monthly UEL (£4167 for TY19/20)
    M2 - Earn a minimum of: annual LEL minus monthly UEL (£6136 - £4167 = £1969 for TY19/20)

    This can be in reverse order too.
    Originally posted by intalex
    Just talked to someone from the HMRC NI team who said that it is possible (without details of how) to get a qualifying year with just 1 month's payroll deduction depending on earnings for that 1 month.

    He wouldn't say conclusively that I qualified with just 1 month's payroll this (19/20) tax year, but said they'd review it after the end of the tax year and then decide whether it's a qualifying year or whether they'd allow me to pay voluntary contributions.
    • tigerspill
    • By tigerspill 25th Oct 19, 10:11 AM
    • 424 Posts
    • 226 Thanks
    tigerspill
    Just to clarify this even further, the quickest way to a qualifying year in 2 months is as follows:
    M1 - Earn a minimum of: monthly UEL (£4167 for TY19/20)
    M2 - Earn a minimum of: annual LEL minus monthly UEL (£6136 - £4167 = £1969 for TY19/20)

    This can be in reverse order too.
    Originally posted by intalex
    This is really useful.
    I assume these are gross earnings?
    If so,
    I have done the reverse in that in April my gross was £1942. And in May I had a redundancy payment (much was taxable and included NI payment as part go PILON). So in effect I earned over the ULL.

    So I think this means I am just £27 short for this tax year. Is this correct?
    This is the last year I need to get the full SP so I am guessing I should make the voluntary payment. Do you know how this payment would be calculated given that I am so close to achieving the full year's contribution?
    In effect I think I am less than one week short - does this mean I will pay 1/52 of the yearly £740ish cost?


    Thanks
    Last edited by tigerspill; 25-10-2019 at 11:32 AM.
    • intalex
    • By intalex 26th Oct 19, 10:02 AM
    • 380 Posts
    • 67 Thanks
    intalex
    I assume these are gross earnings?
    Originally posted by tigerspill
    Yes, correct

    And in May I had a redundancy payment (much was taxable and included NI payment as part go PILON). So in effect I earned over the ULL.
    Originally posted by tigerspill
    Does the portion of May gross earnings that attracted an NI deduction exceed UEL? Salary, PILON, Leftover holiday pay would but any statutory and/or ex-gratia payment doesn't attract an NI deduction (only has PAYE deduction), and I'm not sure this can be counted for determining qualifying year. Maybe someone else can confirm this.

    So I think this means I am just £27 short for this tax year. Is this correct?
    Originally posted by tigerspill
    I think you are right, though the HMRC NI Advisor I spoke to suggested that 1 month's deduction can be enough depending on earnings. I wasn't given details of how, but was told to wait until the end of the tax year before they would decide if I've already qualified or would be eligible for voluntary contributions. I'm fairly sure I'll be paying voluntary contributions at the end of the day.

    Do you know how this payment would be calculated given that I am so close to achieving the full year's contribution?
    Originally posted by tigerspill
    My understanding is that you have to pay voluntary NI for each week of UK unemployment in the tax year at Class 2 (£3/wk) or Class 3 (£15/wk) depending on personal circumstances. For me it's Class 2 for ~50 weeks in the tax year as I've moved out of the UK and am working overseas.

    I appreciate this feels harsh for your circumstances, and I hope there's a "cheaper" way for you to get this tax year into a qualifying year. Hopefully someone else on here has ideas?
    Last edited by intalex; 26-10-2019 at 10:14 AM.
    • tigerspill
    • By tigerspill 27th Oct 19, 6:30 PM
    • 424 Posts
    • 226 Thanks
    tigerspill
    Yes, correct

    Does the portion of May gross earnings that attracted an NI deduction exceed UEL? Salary, PILON, Leftover holiday pay would but any statutory and/or ex-gratia payment doesn't attract an NI deduction (only has PAYE deduction), and I'm not sure this can be counted for determining qualifying year. Maybe someone else can confirm this.

    I think you are right, though the HMRC NI Advisor I spoke to suggested that 1 month's deduction can be enough depending on earnings. I wasn't given details of how, but was told to wait until the end of the tax year before they would decide if I've already qualified or would be eligible for voluntary contributions. I'm fairly sure I'll be paying voluntary contributions at the end of the day.

    My understanding is that you have to pay voluntary NI for each week of UK unemployment in the tax year at Class 2 (£3/wk) or Class 3 (£15/wk) depending on personal circumstances. For me it's Class 2 for ~50 weeks in the tax year as I've moved out of the UK and am working overseas.

    I appreciate this feels harsh for your circumstances, and I hope there's a "cheaper" way for you to get this tax year into a qualifying year. Hopefully someone else on here has ideas?
    Originally posted by intalex
    Thank you. I really appreciate your detailed response.

    I believe that I will definitely have exceeded the ULL with May earnings the attract NI contributions so that's seems OK.

    I dont see mathematically how this can be achieved in a single month as the advisor suggested. But maybe I have misunderstood something.

    If the voluntary contributions are based on weeks rather than amount, then that does seem very harsh as that would mean I need to make 44ish or more weeks at £15. Seems a bit unfair.
    • intalex
    • By intalex 28th Oct 19, 7:23 PM
    • 380 Posts
    • 67 Thanks
    intalex
    Thank you. I really appreciate your detailed response.

    I believe that I will definitely have exceeded the ULL with May earnings the attract NI contributions so that's seems OK.

    I dont see mathematically how this can be achieved in a single month as the advisor suggested. But maybe I have misunderstood something.

    If the voluntary contributions are based on weeks rather than amount, then that does seem very harsh as that would mean I need to make 44ish or more weeks at £15. Seems a bit unfair.
    Originally posted by tigerspill
    Happy to help. I don't see how 1 month's deductions can suffice either, but if HMRC insist on waiting before accepting my voluntary contributions then who I am to complain?

    Maybe someone has better ideas to compensate for your shortfall but I wonder if it could be solved with NI credits (somehow), or perhaps take some short term work (e.g. for a week) before the end of the tax year, etc

    I sure do hope this thread helps others heading into job exits proactively manage the situation.
    • Suzzi59
    • By Suzzi59 14th Jan 20, 6:34 PM
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    Suzzi59
    I am so confused after reading this post and a subsequent telephone conversation this evening with HMRC they have told me that I need to work 52 weeks for a qualifying year

    My works pension is payable in June but I was planning on working an extra month to gain a qualifying year which I am short for a full state pension.

    I donít know what to believe, has anyone tested this method recently ?
    • p00hsticks
    • By p00hsticks 14th Jan 20, 7:44 PM
    • 7,370 Posts
    • 8,271 Thanks
    p00hsticks
    I am so confused after reading this post and a subsequent telephone conversation this evening with HMRC they have told me that I need to work 52 weeks for a qualifying year

    My works pension is payable in June but I was planning on working an extra month to gain a qualifying year which I am short for a full state pension.

    I donít know what to believe, has anyone tested this method recently ?
    Originally posted by Suzzi59

    You certainly don't need to work 52 weeks. I think when I quit my last job in 2016 I left at the end of either July or August and was creditted with a full year
    • Suzzi59
    • By Suzzi59 15th Jan 20, 8:14 AM
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    Suzzi59
    pOOhsticks, thank you for insight.
    • xylophone
    • By xylophone 15th Jan 20, 8:32 AM
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    xylophone
    See https://www.thisismoney.co.uk/money/pensions/article-7873583/How-qualifying-years-state-pension-worked-out.html
    • Suzzi59
    • By Suzzi59 15th Jan 20, 3:43 PM
    • 15 Posts
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    Suzzi59
    Xylophone you have been most helpful I quoted this article to HMRC and they totally refused what was quoted in the article. I have no confidence in HMRC call centre.

    Basically my gross monthly salary is £2141 I
    Am I correct in assuming that I only need to work three months in the next financial year 20/21 to meet the requirements for a qualifying year or am I missing something. The article mentioned a primary threshold however Iím not sure if this applies to me?
    • zagfles
    • By zagfles 15th Jan 20, 3:46 PM
    • 14,930 Posts
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    zagfles
    Something missing from Steve Webb's explaination, and which explains the PP's example of a one off £40k payment not making a qualifying year, is that any earnings above the UEL (upper earnings limit) don't count.

    NI works on a pay period basis, the thresholds are here for weekly and monthly pay:
    https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions
    You need to look at each payslip in the tax year and add the total NI'able pay, ignoring completely any period under the LEL, and ignoring any pay over the UEL in that period.
    NI'able pay is generally gross pay but is reduced by any salary sacrifice you make (eg for pensions, benefits etc), this applies even if the benefits are taxable.

    If that comes to over 52x the weekly LEL, it's a qualifying year.
    Last edited by zagfles; 15-01-2020 at 3:51 PM.
    • xylophone
    • By xylophone 15th Jan 20, 4:01 PM
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    • 19,877 Thanks
    xylophone
    And see post 18.
    • zagfles
    • By zagfles 15th Jan 20, 4:14 PM
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    zagfles
    And see post 18.
    Originally posted by xylophone
    Except that doesn't account for periods below the LEL, which don't count at all.
    • zagfles
    • By zagfles 15th Jan 20, 4:18 PM
    • 14,930 Posts
    • 13,520 Thanks
    zagfles
    Xylophone you have been most helpful I quoted this article to HMRC and they totally refused what was quoted in the article. I have no confidence in HMRC call centre.

    Basically my gross monthly salary is £2141 I
    Am I correct in assuming that I only need to work three months in the next financial year 20/21 to meet the requirements for a qualifying year or am I missing something. The article mentioned a primary threshold however Iím not sure if this applies to me?
    Originally posted by Suzzi59
    It's quite close, you'll have to wait till the 2020/21 rates are announced, probably in the March budget.
    • Suzzi59
    • By Suzzi59 15th Jan 20, 4:29 PM
    • 15 Posts
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    Suzzi59
    Fagfles, I assume Iím on the right track then. March is cutting it fine for me but Iíll probably wait. I have to give 4 months notice Iím looking at finishing 10th July 2020
    • zagfles
    • By zagfles 15th Jan 20, 4:48 PM
    • 14,930 Posts
    • 13,520 Thanks
    zagfles
    Fagfles, I assume Iím on the right track then. March is cutting it fine for me but Iíll probably wait. I have to give 4 months notice Iím looking at finishing 10th July 2020
    Originally posted by Suzzi59
    Budget is 11th March. You'll probably be OK, I doubt the LEL will go up over 4% which it'd need to do to keep you under the qualifying level. Plus your final pay will probably count, especially if you get accrued holiday pay etc in your final salary.

    Assuming the £2141 is after any salary sacrifice is taken off.
    • Suzzi59
    • By Suzzi59 15th Jan 20, 5:06 PM
    • 15 Posts
    • 0 Thanks
    Suzzi59
    Thank you, thatís most helpful. Fingers crossed 🤞
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