HMRC write to taxpayers over missing qualifying years for State Pension

HMRC have begun writing to thousands of self-employed taxpayers who may have gaps in their National Insurance records that could affect their State Pension entitlement. The letters are not demands for payment, but offer individuals the chance to fill missing qualifying years dating back to 2015/16 and potentially boost their future State Pension. 

The issue affects some self-employed people who registered as self-employed between 2015 and early 2024, but were not correctly linked to the National Insurance system. In many cases, affected individuals have started self-employment without submitting a CWF1 registration form because they already had a Unique Taxpayer Reference (UTR) for another reason. As a result, HMRC’s National Insurance records did not identify that Class 2 National Insurance contributions were due. 

Other gaps may have arisen where voluntary Class 2 contributions were paid after the 31 January deadline or where payments were first used to clear outstanding tax liabilities rather than make National Insurance contributions. 

HMRC estimate that around 800,000 taxpayers may have affected records, including approximately 160,000 people who are at, or within two years of, State Pension age. Those closest to pension age are being contacted first, with further letters expected over the coming months. 

HMRC have stressed that there is no immediate action required and that affected individuals will be contacted directly. However, taxpayers do not need to wait for a letter before checking whether they have missing years. 

What should taxpayers/agents do?

Receiving a letter from HMRC does not necessarily mean that there is a shortfall, so the first step is to check whether additional qualifying years are actually needed. Some individuals may already have enough years from employment or earlier periods of self-employment to receive the maximum State Pension, meaning further contributions would provide no additional benefit. 

The easiest way to review a record is through the individual’s Personal Tax Account (PTA). By selecting the “National Insurance and State Pension” section, users can view both their State Pension forecast and National Insurance contribution history. Agents do not have access the State Pension details and cannot access PTAs. However, they can assist clients to set a PTA up and explain why missing years have occurred.

Taxpayers should also check that any National Insurance credits, such as those linked to caring responsibilities, have been correctly applied. Missing credits could affect the number of qualifying years recorded. 

If gaps are identified and additional years would increase future State Pension entitlement, affected individuals can follow the instructions in HMRC’s letter to make voluntary Class 2 contributions. HMRC’s exercise is unusual because it allows eligible taxpayers to fill gaps going back to 2015/16, beyond the normal six-year time limit for voluntary contributions. 

For some taxpayers, paying voluntary Class 2 contributions could represent a low-cost way to secure a higher State Pension in retirement.