UK Expats: What to do about your National Insurance Contributions?

Important Update for UK Expats Abroad: How to Maximise Your UK State Pension Before the Deadline

Tom Raynor, Private Wealth Manager at Melbourne Capital Group, recently spoke to FTAdviser about the fast-approaching NICs top-up deadline, urging British expatriates to act swiftly.

“This is a one-off window where expats can fill historic gaps in their NICs record all the way back to 2006. For many, this is the difference between a partial and a full state pension — and the return on investment is substantial,” said Raynor.

The UK government has extended the top-up window until April 5, 2025, allowing those who missed earlier deadlines another chance to catch up on up to 19 years of missed contributions.

If you have recently become self-employed, you must register with HMRC for tax and National Insurance purposes. Starting from April 6th, you must begin collecting business receipts and bank statements to complete your first tax return next year.

National Insurance Contributions

National Insurance Contributions (NICs) are payments made to the government that determine the amount of state pension one is eligible to receive. The government sets aside these contributions for state benefits and handouts.  

When do you start making NICs?

• Age 16 or older.
• Employee earning more than £242 per week from one job.
• Self-employed earning a minimum of £12,570 in profit per year.

You can view rates and thresholds for previous tax years here.

You may also make voluntary contributions to avoid gaps in your National Insurance record while living abroad, which may assist you in avoiding reductions in your state pension benefits later in life.

Your payments will protect:

• Your benefit entitlement if you return to the U.K.
• Your State Pension whether you choose to return to the U.K. or stay living abroad.

The amount you contribute to NICs is determined by your employment status, earnings, and personal situation. Your contributions cease when you reach state pension age, which is presently set at 66, but will increase to 67 in 2026.

Class 2 vs. Class 3: What you should know?

There are two key types of voluntary contributions for those living overseas:

Class 2: Significantly cheaper and available if:

• You worked in the UK immediately before moving abroad, and
• You've lived in the UK for at least 3 continuous years or previously paid at least 3 years of NIC

Class 3: More expensive, and available if:

• You've lived in the UK for at least 3 years in a row or
• Paid NICs for at least 3 tax years

Tom Raynor added that Class 2 contributions are just £179.40 per year, compared to £907.40 per year for Class 3 (based on 2024/25 rates), making this a remarkably cost-effective way to secure a full State Pension.

The Value of Topping Up your National Insurance Contribution

A typical married couple who catches up on their NICs could add approximately £23,000 in lifetime pension income — and this is for a relatively low outlay of just over £1,000 per person.

To receive the full UK State Pension, you need 35 qualifying years of NICs. You must have at least 10 qualifying years on your National Insurance record to receive any UK State Pension. If you have between 10 and 35 years, you'll receive a proportional amount based on your contribution history. Here's what that looks like in 2024/25 terms:

• 10 years: ~£63.20/week
• 30 years: ~£189.60/week
• 35 years: ~£221.20/week (full rate)

For many British expats with gaps in their NIC record, topping up just a few years can unlock thousands of pounds in annual retirement income. The return on investment can be substantial, especially if you qualify for the lower Class 2 contribution rate.

If you have been making contributions prior to April 6th, 2016, your NICs record will be utilised to determine your "starting amount." This figure is the higher of either the amount you would receive under the prior State Pension regulations (which includes Basic State Pension and Additional State Pension) or the amount you would receive if the new State Pension had been in place when you began working.

Overseas? You may still qualify for annual increases

Your State Pension will increase each year but only if you live in:

• the EEA
• Gibraltar
• Switzerland
• certain countries that have a social security agreement with the U.K.

Your new State Pension may be affected if your circumstances change. You can get more information from the International Pension Centre.

If you usually do not pay National Insurance, you may still qualify for certain benefits and the State Pension if you're either:

• an employee earning from £123 to £242 a week from one job
• self-employed and your profits are £6,725 or more a year.

Your contributions are treated as having been paid to protect your National Insurance record.

How can we help?

Raynor highlighted that the process to lodge your intent to pay can take up to two months, so it’s essential to begin now.

“Even lodging your intent before the April 5th deadline is enough to secure your eligibility to top up for historic years — but you must act,” he said.

If you are considering making voluntary contributions to your National Insurance, please do not hesitate to contact our Private Wealth Manager, Tom Raynor at tomraynor@melbournecapitalgroup.com. He will be able to provide you with the necessary form and an example to guide you through the process.