State pension, NI contributions for the self employed, help.

[mattnunn]

I'm a contractor and a company director, I don't pay any NI contribution and file a NIL return each quarter. I started doing this bout 6 years ago and assumed it would be a short term thing so wasn't that fussed lloking into how it might effect my state pension, but know it's looking like I'll probably be doing this for the foreseeable.

What's the score, in laymans terms, when it comes to this, do i get a credit by filling a NIL contribution, should I be making volunatary contributions. I've read the HMRC guidance notes but it doesn't seem clear to me what I should be doing, the various classes of contribution seemes designed to confuse.

I know there is talk of changing the system which is what prompted me to think about it.

Cheers

[Eric Mc]

There are a number of options.

You could increase your salary so that you trigger Employee and/or Employer Contributions

You could increase your salary above the Lower Earning Limit (currently £107 per week). This will not generate an NI amount due but will ensure that a "credit" is posted to your NI contributions record.

Above £144 per week an Employer's NI amount will become due.

Above £147 per week, Employee's NI will also become due.

[mattnunn]

Eric Mc said:

There are a number of options.

You could increase your salary so that you trigger Employee and/or Employer Contributions

You could increase your salary above the Lower Earning Limit (currently £107 per week). This will not generate an NI amount due but will ensure that a "credit" is posted to your NI contributions record.

Above £144 per week an Employer's NI amount will become due.

Above £147 per week, Employee's NI will also become due.

Nice one Eric, I currently take £144 a week salary as advised by my accountant, I should have never doubted him, it's just he blinds me with numbers and regs, all these different types of NI etc...

So this means I get a "credit", so I can do this for the next 30 years and still be able to claim a full state pension? (assuming there aren't any changes to the system etc...)

[Eric Mc]

You can always phone the Pension Service to get a "prediction" of what your State Pension will be.

[mattnunn]

Cheers Eric, you can do it online through the Gateway, just got to wait for an activation code...

[sumo69]

Matt

I find it hard to understand that you weren't aware why you were being paid this sum - do you not TALK to your accountant at all regarding tax efficient remuneration?

I assume IR35 isn't an issue despite your "contractor" status?

David

[mattnunn]

sumo69 said:

Matt

I find it hard to understand that you weren't aware why you were being paid this sum - do you not TALK to your accountant at all regarding tax efficient remuneration?

I assume IR35 isn't an issue despite your "contractor" status?

David

I glaze over at the first sight of a Pin Stripe I'm afraid, I was aware that the sum brought me into a advantageous tax and more importantly NI position, what I really wanted to know is what the effect of filling NIL NI returns every quarter for the next 30 years is going to have on my ability to claim the state pension.

It is all a bit complicated around pensions and that isn't it?

I'm outside IR35.

[sumo69]

So long as you are taking £107 per week this tax year (and £109 next) or a monthly/annual equivalent then you receive a full credit for the year towards your state pension.

You can sleep easy...and I never wear a pin-stripe either!

David

[Eric Mc]

Only my pyjamas are pinstriped.

[sumo69]

Outstanding accountants go commando!!

David

[Eric Mc]

I didn't say I wear them

They're just for emergencies.