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National Insurance – A tax with benefits? Part 2

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  • Post published:October 1, 2020

In part one of this article, last month, I covered the different Classes of National Insurance and how payments are calculated.

In part two, I briefly cover the complex area of State Pensions, the interaction between National Insurance and being in prison, and some useful telephone numbers.


State Pension

Eligibility – old State Pension

You are entitled to the basic State Pension if you were born before:

• 6 April 1951, if you’re a man;

• 6 April 1953, if you’re a woman.

Were born on or after these dates you must claim the new State Pension (see below) but only when you reach State Pension age.

To get the full basic State Pension you need a total of 30 qualifying years of National Insurance contributions or credits. This means you were either:

  1. Working and paying National Insurance;
  2. Getting National Insurance Credits, for example for unemployment, sickness or as a parent or carer;
  3. Paying voluntary National Insurance contributions.

When you have fewer than 30 qualifying years, your basic State Pension would be less than £134.25 per week.


Eligibility – new State Pension (from 6 April 2016)

You are entitled to claim the new State Pension if you’re:

• Any man born on or after 6 April 1951;

• Any woman born on or after 6 April 1953.

The earliest you can get the new State Pension is when you reach State Pension age.

If you reached State Pension age before 6 April 2016, you would get the State Pension under the old rules instead.

You will also need 35 qualifying years to get the new full State Pension and a minimum of ten years to receive a pension at all.

For the tax year 2020-21 the full new State Pension is £175.20 per week.


Getting a Pension Statement

You can obtain a State Pension statement by calling 08007310175. You can also write to:

Newcastle Pension centre, Futures Group

The Pension Service 9, Mail Handling Site A,

Wolverhampton WV98 1LU.

This statement will provide a breakdown, if any, of gaps in your National Insurance contribution record.


Prison and National Insurance

Usually, National Insurance credits can be awarded to individuals that are unemployed or incapacitated and are regarded as temporarily out of work.

As a prisoner you do not receive National Insurance credits but you can however make voluntary contributions towards your State Pension and these can be paid up to six years after the tax year in which you were released from prison.

When you are serving your custodial sentence you are not liable to pay National Insurance contributions. The exception to this are those on ROTL that are in employment outside the prison.

Were you an individual receiving a State Pension prior to prison, this would stop automatically on entering prison. However, if you are not convicted of a criminal offence you will receive all your pension payments due back in one lump sum.

Registering for a National Insurance number

The National Insurance number application (England, Scotland and Wales). Telephone: 0800 141 2075.


Prior to going self-employed on release remember to get your tax affairs in order

Get The Tax Academy CIC to review your tax affairs to ensure they are up to date.

There is nothing worse than being released from prison and finding that you have tax penalties and tax debt that need to be resolved with HMRC, particularly when going self-employed.

Contact Paul Retout from The Tax Academy CIC on 01824 704535 or write to me, The Tax Academy CIC, Unit 4 Ffordd Yr Onnen, Lon Parcwr Business Park, Ruthin, Denbighshire LL15 1NJ.