Millions of workers across the UK could be entitled to a significant financial boost from the Department for Work and Pensions (DWP) when they turn 66, even if they choose to remain in employment. The key change involves an end to mandatory National Insurance Contributions (NICs), a rule many older employees may not be aware of.
The National Insurance Rule Change at State Pension Age
Currently, the State Pension age in the UK is 66, though it is scheduled to rise incrementally to 67 between 2026 and 2028. Upon reaching this milestone, individuals have several options: they can retire and claim their State Pension, defer it to increase future payments, or continue working while also drawing their pension.
A critical benefit for those who keep working is that they are no longer required to pay National Insurance through their salary from the age of 66. This can represent a substantial increase in take-home pay. However, this change does not happen automatically. Employees must proactively inform their employer to stop the deductions.
It is important to remember that Income Tax still applies. The Personal Allowance remains frozen at £12,570 until April 2030. Any income above this threshold, including from a State Pension, private pension, or salary, will be subject to tax.
How to Stop Payments and Claim Refunds
Official government guidance states that to halt National Insurance deductions, an employee must provide their employer with proof of age, such as a birth certificate or passport. For those who prefer not to share these documents, HM Revenue and Customs (HMRC) can issue a confirmation letter instead.
The letter from HMRC will verify two key points: that the individual has reached State Pension age and that they are no longer liable to pay National Insurance. To request this letter, you must contact HMRC in writing, explaining your reasons for not wishing to show your personal documents to your employer.
If you have already reached State Pension age and have continued to pay NICs, you can claim this money back. This applies to both employees and the self-employed. For self-employed individuals, Class 2 contributions cease to be treated as paid, and Class 4 contributions stop from the 6th of April following the tax year in which you turn 66.
Understanding the Wider Impact
This rule impacts a significant portion of the population. Nearly 13 million people in Great Britain are of State Pension age and receive weekly payments of up to £230.25 from the DWP. For many, continuing to work is a financial necessity or a personal choice, and understanding this NIC exemption is crucial for effective retirement planning.
While deferring your State Pension can increase your annual payments by over £600 each year, the immediate boost from stopping NICs can provide valuable extra income for those still earning. Comprehensive information on stopping National Insurance payments and available tax reliefs for those over State Pension age can be found on the GOV.UK website.
In summary, reaching State Pension age brings a valuable financial perk for workers. By taking a simple step to inform your employer or HMRC, you can ensure you stop paying National Insurance and keep more of your hard-earned money.
