Thousands have had their Class 2 NICs – a flat-rate weekly charge of £3.45 paid by self-employed people – wrongly refunded by HMRC, often without their knowledge.
Missing a year of NI credits can have a lasting impact, reducing your state pension and affecting entitlement to benefits such as Maternity Allowance and Employment and Support Allowance.
This is much less than the full £11,973, or £230.25 per week.
“One year missing would equate to around £342 less a year in state pension,” Ross Lacey, director and financial planner at Fairview, said. “This can add up to a huge amount over time.”
How National Insurance credits affect your pension
Your state pension depends on how many years you’ve made NICs for, known as qualifying years.
These contributions are made before you reach retirement age, usually if you’re employed, self-employed or receiving certain benefits like Universal Credit or Jobseeker’s Allowance.
You normally need at least 35 qualifying years of contributions to get the full amount (currently £230.25 a week), or 10 qualifying years to get the minimum (currently £65.79 a week).
You can buy back missing years but this can cost around £923 annually – far more than ensuring contributions are recorded properly in the first place.
HMRC says it is contacting those affected, but experts are urging the self-employed to check their NI records urgently.
He said: “For those who’ve had their Class 2 NICs refunded incorrectly by HMRC, this will potentially impact the state pension they get in the future.
“But those missed years would cost them a lot more if the problem isn’t identified and addressed.”
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However, self-employed people with annual profits below the small profits threshold (SPT) can still choose to pay them voluntarily to protect their entitlement to the state pension and other contributory benefits.
In many cases, HMRC would issue a self-assessment statement (SA302) showing Class 2 NIC was due, then remove it with a correction message, leaving the person without the credit.
He said: “Many very small businesses still do need to keep up their voluntary contributions and may mistakenly believe that they don’t.
Anyone unsure of their status should log into their Government Gateway account to check their NI record and state pension forecast. Experts also recommend speaking to HMRC if anything seems amiss.
Since April 2024, self-employed people whose profits meet or exceed the SPT no longer need to pay Class 2 NICs for that year – those contributions are treated as made automatically.
Zoe Dagless, director of Meliora Financial Planning, said: “It wasn’t enough to simply declare and pay Class 2 NICs through the tax return, there was a separate process for notifying HMRC, which many people understandably overlooked.
An HMRC spokesperson said: “We’re sorry to those affected and are working hard to resolve the issue.”
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