UK National Insurance Contributions and State Pensions When Overseas
Published / Last Updated on 23/11/2024
Social security in the UK is covered by National Insurance Contributions. NIC has been in the news a lot over the last few weeks given the huge increase to UK employers NIC to 15% and the threshold lowered at which it is payable. This may mean redundancies, a lack of recruitment and reduced or alternative pay rises for existing employees. It is certainly putting a strain on business planning for 2025 onwards.
What does NIC Pay for?
- The National Health Service (NHS) – funding much needed given cutbacks over the last few years.
- State Pensions and state pension increases over the last few years due to higher inflation both in consumer prices and also wages inflation.
- Basic State Pension
- Additional State Pension
- New State Pension
- New Style Jobseeker’s Allowance
- Contribution-based Employment and Support Allowance
- Maternity Allowance
- Bereavement Support Payment
- Other state benefits including disability, personal independence payments and more.
State Pension and State Pension Credits
- To qualify for a full UK State Pension, you must have 35 years NIC credits.
- If you have less than 10 years credits e.g., you have lived/worked overseas and returned to UK or you have now left the UK for a new life overseas. If you do not have full credits when you reach State Pension Age you will receive a proportion of the UK State Pension.
- NIC credits are accumulated by:
- Working (employed of self employed) and paying NIC.
- Home responsibilities protection e.g., you are an ‘at home’, unpaid worker either caring for children or indeed elderly or disabled loved ones.
- You do not get NIC credits if you are in prison.
- Paying Class 3 Voluntary NIC if you have a shortfall in credit years, you will be able to gain credits or you have moved overseas and you wish to keep buying NIC credits to get yourself over 10 years credits or indeed go all the way to get the full 35 years.
What Happens if you Move to/Live Overseas?
You will need to look at two treaties.
- Social Security Treaty between UK and the country you live In.
- If there is a treaty, you will usually get your state pension paid from the UK but there may be times where you are better off if your UK credits are transferred to the ‘treaty’ country that you live in to getter a bigger state pension there.
- If there is no treaty and assuming you have more than 10 years credits, your UK state pension will be paid from the UK only.
- If there is a treaty and you have lower than 10 years UK credits, you are not entitled to a UK state pension and credits may be transferred overseas.
- If there is no treaty and you have less than 10 years UK credits, your credits are lost so you may wish to top up with voluntary NIC.
- Double Tax Treaty between UK and the country you live In.
- Depending upon the treaty, your UK State Pension will be taxable where you live or taxable in the UK.
- If there is no tax treaty, your UU State Pension will be taxable in the UK but you may or may not get a UK Personal Tax Allowance currently up to £12,570 (tax free income up to this level).
- British and EEA citizens living overseas are still entitled to a UK personal tax allowance.
- If you are not a British National or EEA citizen, whether you are entitled to a personal tax allowance will be detailed in Tax Treaty.
- If you are overseas, you must claim the UK personal allowance each year using HMRC Form R43.
