HMRC has provided an update on a longstanding issue that may have left approximately 800,000 self-employed taxpayers with gaps in their National Insurance (NI) records, potentially affecting entitlement to the State Pension and certain other contributory benefits.
Who could be affected?
The issue may affect individuals who became self-employed between 2015 and early March 2024 and did not separately notify HMRC of their self-employment status by submitting a CWF1 registration form. According to HMRC, some taxpayers may have completed the self-employed pages of their Self Assessment tax returns but were not correctly recorded for Class 2 National Insurance purposes. As a result, some individuals could have missing years in their NI contribution record, which may reduce their entitlement to the State Pension.
What is HMRC doing?
HMRC has confirmed that the issue has been resolved for the 2024/25 tax year onwards. For earlier years, the department has outlined a programme to identify and support affected taxpayers.
As part of this process:
- Around 160,000 taxpayers who are already above State Pension age, or within two years of reaching it, will be contacted by HMRC by summer 2027.
- Some pensioners may be entitled to receive State Pension arrears where gaps in their NI records have affected payments.
- Other affected taxpayers are not expected to receive correspondence from HMRC before spring 2027.
- HMRC plans to enhance its online State Pension forecast service, enabling taxpayers to identify any NI record gaps and take corrective action where required.
What should taxpayers do now?
HMRC has requested that taxpayers do not contact HMRC or the Department for Work and Pensions at this stage regarding this issue.
However, individuals may wish to review their historic Self Assessment records and online tax account to establish whether Class 2 NIC has been recorded correctly. HMRC has also confirmed that affected taxpayers will be able to make voluntary contributions for earlier years beyond the normal six-year limit and at the original rates where necessary.
Importantly, HMRC has stated that it is not actively seeking to collect unpaid Class 2 NIC from those affected by this issue.
Why is this important?
A complete National Insurance record is a key factor in determining entitlement to the full State Pension and certain other benefits. Missing qualifying years can have a lasting financial impact, particularly for those approaching retirement. Taxpayers who have been self-employed at any point since 2015 should therefore remain alert to future correspondence from HMRC and review their NI position when the updated online tools become available.
How we can help
If you are concerned that you may be affected by this issue, or would like assistance reviewing your National Insurance record and State Pension position, our tax specialists can help. We can advise on the implications of any gaps identified and support you in taking any corrective action when HMRC’s review process is completed.
For further information, please contact Zad Butt or your usual Hillier Hopkins adviser.
