How National Insurance works
If you work - either as an employee or self-employed - and your earnings are over a certain level you pay National Insurance contributions (NIC). You pay them from age 16 until you reach State Pension age. This is 65 for men and 60 for women born on or before 5 April 1950 - but it will gradually increase to 65 for women over the period from 2012 to 2020.
You pay NICs throughout your working life. They build up your entitlement to the State Pension and to certain social security benefits. The type and level of NICs you pay depends on how much you earn and whether you're employed or self-employed.
What are the different types of NICs?
If you're employed you pay Class 1 NICs as a percentage of your earnings. If you're self-employed you pay Class 2 at a flat weekly rate and Class 4 NICs annually, as a percentage of your taxable profits. You may also pay voluntary Class 3 NICs.
What happens at State Pension age?
Once you're over State Pension age you don't have to pay Class 1 or Class 2 NICs if you carry on working. You'll only have to pay them on any earnings that were due to be paid to you before you reached State Pension age.
However, if you're self-employed, because Class 4 NICs are an annual charge, you may still have to pay them on any taxable profits for the year in which you reach State Pension age. You will be exempt from payment from the beginning of the following tax year.
What if I continue working?
If you stay in employment or self-employment after State Pension age you can apply to HM Revenue & Customs (HMRC) for an Age Exception Certificate so that you don't pay NICs. You can contact them on the National Insurance enquiries for employees and individuals Helpline on 0845 302 1479
8.00 am to 5.00 pm, Monday to Friday. For customers who are deaf or hearing or speech impaired the number is instead - 0845 915 3296 (Textphone).
Make sure you provide your name, address, contact number and your National Insurance number. Once you receive your certificate from HMRC give it to your employer. This will allow them to stop deducting NICs from your earnings. Alternatively, you can show your birth certificate or passport as evidence that you have reached State Pension age.
If you're self-employed and have reached State Pension age you can stop making NICs payments (though Class 4 may be due on your taxable profits in the year during which you reach State Pension age, as described earlier). The Age Exception Certificate, though not required if you're self-employed, will provide useful evidence of your age should you be asked.
The Department for Work and Pensions (DWP) includes information on Age Exception in the pack they issue to people approaching State Pension age. DWP can also issue Age Exception Certificates and they are sometimes in paper format rather than card, but are equally acceptable for proof of age.
What if I think I've overpaid NICs
You might find you've overpaid NICs in certain circumstances. For example:
- you carried on working after State Pension age and your employer continued to deduct Class 1 NICs
- you paid Class 4 NICs on profits from self-employment in respect of a tax year after the one in which you reached State Pension age
- you paid Class 2 NICs as a self-employed person when your earnings were below the Small Earnings Exception (SEE) limit. If you think you may have overpaid use this link which gives details on how to claim back overpaid NICs.
