Do You Pay National Insurance on Pension Income?
You’ll stop making National Insurance Contributions when you reach state pension age, so you won’t normally need to pay NI on any pension payments or other income. You might still have to pay income tax though, if your taxable income exceeds the personal tax allowance.
National Insurance (NI) for retiring self-employed people
You won’t continue to make NI contributions once you reach state pension age, although you may still have to pay Class 4 NI for the remainder of the tax year in which you retire if you are self-employed and your earnings hit the Class 4 NI threshold (also known as the Lower Profits Threshold – £12,570).
If you’re planning to retire from your own business, remember to let HMRC know that you have stopped working! You will need to send them your final Self Assessment tax return, covering the period until you finished working.
When does National Insurance start and stop?
National Insurance Contributions are payable from the age of 16 until state retirement age. The amount of NI that you have to pay depends on how much money you earn, and whether you’re employed or self-employed.
This means that you could continue working past state retirement age, or even retire from employment and set up your own business, and won’t need to pay National Insurance!
What happens if I retire early?
Plenty of people retire before state retirement age. It might be possible to receive your pension early if you have one through your employer or if you have a private pension as a self-employed person. You’ll be able to check this with your employer or pension scheme provider, but be aware that there might sometimes be tax implications for taking money out of your pension pot early.
Even if you retire early, you won’t receive your state pension until you reach state retirement age.
Early retirement might also mean that the amount of state pension you eventually receive is less. This is because you might not have made enough NI contributions. You can check your National Insurance record online using your Personal Tax Account to see how many qualifying years of contributions you have made.
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I plan to retire at 60 in 2022. I have an NHS pension but can’t get my state pension until I’m 67. Will I still pay NI contributions until I get my state pension? I will have paid in 44 years of full NI contributions. Also will I pay tax on my lump sum from my NHS pension?
Hi Jean, thanks for your message. You don’t pay National Insurance contributions (NICs) on any payments that you receive from a pension scheme, including an annuity, but you may be liable to income tax on these payments. You will continue to pay NI on income such as employment and self employment until you reach state pension age. Pensions are taxable income, but you can take 25% tax free. Pension providers often issue a P60 and sometimes they deduct tax. There is a P55 form that can be filled in to reclaim tax on flexibly accessed pensions. It’s a bit of… Read more »