Tax Credits: National Insurance Credits
A person who receives Working Tax Credit but doesn’t pay National Insurance (NI) contributions, because their earnings are too low, may receive automatic NI credits that help to protect entitlement to state pension and certain bereavement benefits.
There are various earnings-related rules about National Insurance contributions. If you earn weekly, then a weekly earnings limit is used and if you earn monthly, then a monthly limit is used. NI contributions and credits relate to each pay period. You are allowed to earn a certain amount before you have to pay anything but if you earn less than the lower earnings limit in a week, then that wage won’t normally contribute to your National Insurance record. The actual rates and thresholds usually change each year and can be found on the GOV.UK website.
If you earn above the National Insurance Primary Threshold, currently £155 per week, then you should pay National Insurance contributions and that should be clear on your pay or wage slip. If you earn above the Secondary Threshold (currently aligned £156 per week) your employer will also be liable to pay the employer rate of national insurance related to your employment/earnings.
If you earn above the Lower Earning Limit (LEL) for National Insurance, currently £112 per week but below the Primary Threshold (£155 per week), then you won’t actually pay any NI contributions on that wage but your record will be automatically credited with basic NI credits for that week.
If you earn below the Lower Earnings Limit (LEL) for National Insurance, then you won’t be liable to pay NI contributions and that week won’t generally contribute towards your NI record.
More information about National Insurance contributions is on the GOV.UK website.
However, if you earn below the Lower Earnings Limit, aren’t already paying NI contributions and you also receive Working Tax Credit (WTC), then you may be entitled to receive National Insurance credits which protect your NI contribution record towards receipt of certain state benefits and state pension.
There is more information about NI credits on the GOV.UK website.
Broadly, people who get WTC with earnings below the LEL (or as a self-employed person your earnings are below the small profits threshold, £5965 per year) should get the following types of NI credits:-
- If you receive basic WTC - Class 3 contributions only, which protect entitlement to state pension , certain bereavement benefits and widowed parent’s allowance.
- If you receive basic WTC and the disability or severe disability element of WTC - Class 1 contributions, which protect entitlement to state pension, bereavement benefits and some other state benefits.
If you have a joint claim to WTC, the legislation treats WTC as paid to the person with earnings. If a couple both have earnings, then the person who is physically paid the WTC will receive the credits This latter point is extremely important as many sources of information on this topic from HMRC and DWP refer to people ‘getting’ or ‘receiving’ WTC in order to receive the credits which can mislead joint claimants into believing that it makes no difference whom they choose to be paid the WTC. Following representations from LITRG, since 2012 TC600 notes now carry a warnings message, however prior to this date the notes were silent on this point. If any claimant has missed out on credits as a result of making the wrong election prior to 2012/13, providing their partner was not given or did not need the credits, a complaint should be made to the Tax Credits Office (TCO and onwards to the Adjudicator’s Office if necessary. More information can be found in our making a complaint section.
NI credits paid in respect of WTC entitlement should be made automatically but you can ask HMRC for a statement of your National Insurance record to check whether you have paid the correct contributions and whether you are receiving any automatic credits. More information on how to do this can be found on the GOV.UK website.
Updated 18 January 2016
Last reviewed 9 June 2016