I retired in summer 2016 and want to buy two years’ worth of national insurance contributions (NICs). However, near the end of last year I did a one-off piece of work, for which I was paid a fee. The work took four and a half months, although I did not work every day. I also look after two of my grandchildren every week.
When it comes to my NICs, I think I have three choices: buy two years’ voluntary NICs for 2017/18 and 2018/19, take advantage of childcare credits, or register as self-employed and pay class 2 NICs.
I spoke to the national insurance helpline twice. The first person told me I had to register as self-employed as the amount I earned was over £2,000. He said I would pay NICs and then top up with childcare credits.
The second person said it was up to me whether I registered as self-employed, although clearly I have to pay tax on the fee, regardless.
The work I did was a one-off, so unless I am required to pay class 2 NICs or it is to my advantage to do so, I would rather not. I want to do things properly, but really need some advice on what action I should take.
If you know that by paying two years of NICs you will boost your state pension, then the cheapest option is to check whether looking after your grandchildren qualifies you for NI credits. To find out if you’re entitled to childcare credits, visit Gov.uk/national-insurance-credits/eligibility and go to ‘Family members who care for a child’.
The next-cheapest option is to find out if you can pay class 2 voluntary NICs (VNICs) for your period of work. For this, you need to be treated as self-employed and to register as such.
As you only earned about £2,000, you would need to pay voluntary NI contributions (VNICs) for this period. And this work would only help count towards one qualifying year, ie, the 2017/2018 tax year.
Please note that VNICs don’t always increase your state pension. Contact the Future Pension Centre at Gov.uk/future-pension-centre to find out if you’ll benefit from voluntary contributions for these two years. The current cost of paying class 3 VNICs is £14.65 a week and for class 2 it’s £2.95 a week.