Around 800,000 self-employed people could have gaps in their National Insurance (NI) record because of an HM Revenue and Customs (HMRC) administrative error that may affect their State Pension entitlement.
HMRC and DWP notify affected customers
HMRC and the Department for Work and Pensions (DWP) have started writing to Self Assessment customers who became self-employed between 2015 and early 2024 to explain the issue and outline the action being taken to ensure they do not miss out on their State Pension.
The tax authority believes around 800,000 customers may have gaps in their National Insurance record because of the issue. It also estimates around 160,000 people who have reached, or are within two years of reaching, State Pension age could be affected, although that figure may reduce once records are reconciled with DWP data.
Former DWP employee urges regular checks
Sandra Wrench, a former DWP employee with 42 years' experience working across State Pension and benefits, believes the issue highlights why people should regularly check their National Insurance record.
She told the Daily Record her own sister experienced what now appears to have been a very similar problem after becoming self-employed in April 2016.
Sandra said: "In 2020, my sister's National Insurance record showed that the 2017/18 and 2018/19 tax years were qualifying years, but 2016/17 was still showing as non-qualifying.
"When she contacted HMRC, they admitted the Class 2 National Insurance contributions for that year had been paid, but had later been removed from her National Insurance record, possibly because of late registration of her self-employment.
My sister had to pay the Class 2 National Insurance contributions again before the qualifying year was eventually restored and she received the correct rate of State Pension.
This is why it is essential to check your National Insurance record every year for any potential mistakes."
Cause of the issue
The problem relates to the way some people registered as self-employed between 2015 and early 2024. According to HMRC, people becoming self-employed were required to register their status by completing a CWF1 form.
Even if they completed the self-employed section of a Self Assessment tax return, failing to complete the separate CWF1 notification meant the change in employment status may not have been correctly recorded.
As a result, some people may not have paid sufficient Class 2 National Insurance contributions and could have gaps in their National Insurance record that affect the amount of State Pension they receive.
What affected customers should do
HMRC stressed there is no need for affected customers to contact either HMRC or DWP at this stage. Instead, letters are being issued explaining exactly what people need to do.
Anyone identified as having gaps directly linked to the issue will be able to make National Insurance contributions beyond the normal six-year time limit and at the original Class 2 contribution rate.
Myrtle Lloyd, HMRC's Chief Customer Officer, said: "There is no need for people to do anything now. We have identified those affected and are contacting them to reassure that processes have been set up to remedy the situation now and for the future. We want to make sure no one misses out on their State Pension entitlements."
HMRC said customers who correctly declared they were self-employed when registering for Self Assessment are not affected by the issue. The department also warned people not to retrospectively register as self-employed because this could disrupt the process of identifying those affected.
Anyone who wants to check their National Insurance record or State Pension forecast can do so through GOV.UK.
