Wooden blocks reading 2025, with the 5 turning over to a 6. Coins in piles of increasing height left-to-right on top of the blocks, with a hand holding a magnifying glass above them
Rate increase for voluntary National Insurance Contributions whilst overseas

Social security obligations for employees working overseas are a tricky area. We covered getting NIC deductions right for internationally mobile employees in a previous edition of Employer Focus, highlighting updated guidance from HMRC. 

Even where there is no obligation to pay NICs whilst working overseas, some individuals choose to do so voluntarily, often to build entitlement to a UK State Pension, which will be particularly important if they intend for work overseas for several years before their retirement. 

Budget 2025 announced changes expected to apply from April 2026 for individuals paying voluntary NICs for periods spent abroad, which may be relevant to some employees based overseas. 

Current rules

In brief, individuals working overseas can voluntarily pay Class 2 NICs if they were employed or self-employed immediately before leaving the UK, and have either lived in the UK for at least a three year continuous period or had paid NICs for a sufficient period before leaving the UK. The exact conditions for paying voluntary Class 2 NICs vary depending on circumstances. 

Individuals based overseas but who are not working are not eligible to pay voluntary Class 2 NICs. Instead they can choose to pay Class 3 NICs if they lived in the UK for at least three continuous years before leaving, had paid NICs for a sufficient period before leaving the UK, or if they were subject to Class 1 NIC for the first year of a previous overseas employment. 

What’s changing?

For those eligible, paying voluntary Class 2 NICs is a cheaper option than paying Class 3 – the weekly cost at current rates is £3.50 for Class 2, compared with £17.75 for Class 3. 

The Chancellor announced at Budget 2025 that from 6 April 2026, employees spending periods of time outside the UK who are not subject to UK social security but who want to pay voluntarily NICs will only be able to do so using Class 3 NIC payments. 

In addition, the eligibility criteria to pay Class 3 NICs for periods abroad will be tightened – requiring 10 years of continuous residence in the UK, or 10 years of paying NICs (excluding voluntary payments from abroad) rather than three years under current rules. 

Voluntary NICs paid before 6 April 2026 will still count as qualifying years for State Pension entitlement. However, to help with future planning, employees who may be affected by these changes should check their NIC record and consider their options for further contributions, factoring in the higher cost of paying Class 3 NICs rather than voluntary Class 2 from 6 April 2026. 

By checking their NIC record, employees should be able to identify any years up to 5 April 2026 which are ‘incomplete’. These are likely to be cheaper to top up to full years than will be the case for periods falling after that date. 

Voluntary Class 2 will remain an option for those eligible for periods up to 5 April 2026. Class 2 NICs for the 2025/26 tax year should ordinarily be paid by 31 January 2027. However, where an individual identifies incomplete years in their NIC record, they must make any ‘top up’ payments to fill these gaps years within six years of the end of the tax year in question – eg by 5 April 2032 at the latest in respect of the 2025/26 tax year. 

We are expecting further guidance from HMRC on these changes in due course. HMRC aim to contact anyone paying voluntary Class 2 NICs from abroad about these changes during summer 2026. 

 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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