Class 3 National Insurance Contributions

Class 3 National Insurance Contributions

Class 3 National Insurance contributions are voluntary contributions that can be made to fill the gaps in your contribution record. The reason why you should consider making class 3 contributions is that it will Increase your entitlement to state retirement pension and other benefits such as Incapacity Benefit.

People retiring after 5 April 2010 need only 30 years’ contributions to qualify for the full state pension. However, the single-tier state pension to be introduced from 6 April 2016 will require 35 years of contributions in order to receive maximum entitlement.

There is therefore less need for a person to pay voluntary class 3 contributions once they have reached 30 years of contributions.

Information About Class 3 NIC

  • HMRC notifies people annually if their contribution record is inadequate.
  • Current rate (2014/15) is £13.90 per week or £722.80 per year.
  • Can only be paid for a year if the person has insufficient class 1 or class 2 NIC for that year.
  • Contributions are collected by HMRC by quarterly demand or monthly direct debit.
  • Class 3 contributions can be paid up to six years after the tax years to which they relate. However, they must sometimes be paid at the rate for the year in which they are paid instead of the rate for the year for which they are paid.
  • Class 3 contributions cannot be paid in the tax year in which a person reaches state pension age or any subsequent year. This also applies to class 2 contributions.
  • Payment of class 3 NIC is subject to a residence condition. You must fulfil one of the following criteria but not all:
    • Be resident in the UK throughout the tax year concerned
    • Have arrived during the tax year and been previously liable to pay class 1 or 2 NIC
    • Have arrived during the tax year and been resident for 26 weeks.

People going abroad may be able to pay class 3 NIC if they have previously been resident in or paid NIC in the UK.

  • A self-employed person who goes abroad or comes from abroad may not be required to pay class 2 NIC and may have the option of paying either voluntary class 2 or class 3 contributions. As class 2 NIC is payable at a much lower rate than class 3 NIC, paying class 2 NIC is preferable. There are no advantages to paying class 3 compared to class 2 NIC.

Class 3A Contributions

A new class of voluntary National Insurance Contribution will be introduced from October 2015 for a limited 18-month period. This will be known as Class 3A, and will give people who have reached, or will reach, state pension age before the single-tier state pension is introduced an opportunity to boost their second state pension entitlement by up to £25 per week.

The contribution rate per additional £1 per week of pension will depend on the person’s age at the payment date.