Our experts at DSR Tax Refunds know how hard it is to find good, quality information about HMRC’s National Insurance rules that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What was the reduced rate scheme?
Until April 1977, married women could opt to pay a reduced rate of National Insurance on their earnings. At the time it was also known as the ‘small stamp’. If they opted into the scheme before it ended, they may still be paying the reduced rate of National Insurance. If they opted into the scheme, they will pay a reduced rate of 5.85% on their weekly earnings between £183.01 and £962, if they are employed, instead of the usual rate of 12%.
If you are self-employed and you opted into this scheme before it ended, it means that you won’t pay Class 2 National Insurance contributions.
How are your benefits affected if you opted into the scheme?
If you opted to pay a reduced rate of National Insurance, it means that your entitlement to certain contribution-based benefits is also reduced. This means that you won’t be entitled to claim your full State Pension and you won’t be entitled to claim certain benefits, including contribution-based unemployment benefits.
It also means that you won’t be entitled to claim National Insurance credits unless:
You get child benefit for a child under 12
You are looking after someone who is sick or disabled
You are a widow.
You might still be entitled to claim the following benefits, even if you do pay a reduced rate of National Insurance:
Statutory benefits, such as Statutory Sick Pay
Benefits which aren’t contribution-based, such as Carer’s Allowance
Benefits based on your husband’s contributions, such a Bereavement Allowance.
Can you stop paying the reduced rate of National Insurance?
Yes, you are able to opt out of the scheme but once you do so, you won’t be able to opt back in at a future date. You will need to send form CF9 (if you are married) or CF9A (if you are a widow) to HMRC to opt out of the reduced rate scheme.
There are certain circumstances which mean that you would no longer have the right to pay a reduced rate. These are:
If you get divorced
If you haven’t earned above the Lower Earnings Limit, which is currently £118 a week, or if you have been self-employed – these need to have applied for two tax years in a row.
If your husband dies, you may be able to keep paying the reduced rate for a certain amount of time afterwards but you need to let HMRC know of the change in your personal circumstances.
If you no longer have the right to pay reduced National Insurance contributions, you must let HMRC know or you may end up owing them money in unpaid contributions if you don’t.
How do you pay the reduced rate of contributions?
You must already have opted into the scheme before it closed in April 1977 – if you didn’t do so, you can’t claim a reduced rate of National Insurance contributions.
If you had already opted into the scheme before its closure, you should have a ‘Certificate of Election’. This will be a form from HMRC – form CA4139, form CF383 or form CF380A. You will need to give this form to your employer if you want to claim your entitlement to pay a reduced rate of National Insurance contribution.
If you opted into the scheme before it closed in April 1977 but you don’t have your ‘Certificate of Election’, you can apply to HMRC for a new one by sending them form CF9 (if you are married) or CF9A (if you are a widow). They will then send you a new certificate which you can then pass on to your employer to claim your entitlement.
Can you check your State Pension entitlement?
You can get a State Pension statement if you want to an estimate of how much you will receive when you retire. It will tell you how much you could get (this is a forecast amount not an exact amount because it could change before you retire), when you can get it, as well as potentially giving you the option to increase it if you have gaps in your National Insurance record.
You can either check your entitlement online or by filling in form BR19 and returning it to the Department of Work and Pensions.
If you do have gaps in your National Insurance record which are significantly affecting the amount of State Pension you will receive when you retire, you might be able to pay voluntary top-up contributions to fill in that gap.
How can DSR Tax Refunds help?
We know that working out your National Insurance contributions can be a complicated affair, even with our helpful guide to tell you everything you might need to know. It’s all very well reading about it and knowing what HMRC’s stand on it is – but how do you apply that to your own circumstances? It can seem like an absolute minefield but help is always available and you don’t need to battle through this alone. Our team of experts at DSR Tax Refunds are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
This page was last updated on 15/09/2020.