NIM25109 - Class 3 NICs: Additional Class 3 NICs: Number of NICs payable

Regulation 2 of, and Schedule 1 to, the Social Security (Earnings Factor) Regulations 1979

NIM25001 explains the meaning of 鈥渜ualifying earnings factor鈥� (more commonly known as 鈥渁 qualifying year鈥� (鈥淨Y鈥�)). In the case of an individual who reaches State Pension age before 6 April 2010, for the purposes of the second contribution condition for entitlement to basic State Pension:

  • in respect of the 1975/76, 1976/77 and 1977/78 tax years, a QY is one in which:
  • the individual has paid, treated as having paid, or been credited with, Class 1, Class 2 or Class 3 NICs and/or earnings; and
  • the earnings factor (鈥淓F鈥�) derived from such NICs and/or earnings is not less than 50 times the lower earnings limit (鈥淟EL鈥�) for the tax year in question
  • in respect of the 1978/79 and subsequent tax years, a QY is one in which:
  • the individual has paid, treated as having paid, or been credited with, Class 1, Class 2 or Class 3 NICs and/or earnings; and
  • the EF derived from such NICs and/or earnings is not less than 52 times the LEL for the tax year in question.

Regulation 2, though, provides that, where the EF derived from Class 1 NICs and / or earnings which have been paid, treated as paid, or credited is short of the qualifying earnings factor by not more than a specified amount, then the EF is increased by up to the amount of that specified amount.

Example

Mrs M satisfies the conditions of eligibility for paying additional Class 3 NICs for the 1975/76, 1976/77 and 1977/78 tax years. All three years are non-QYs.

In the 1975/76 and 1976/77 tax years, Mrs M did not pay, was not treated as having paid, or credited, with any NICs. In order to make either year a QY, she will have to pay 50 Class 3 NICs for each one.

In the 1977/78 tax year, though, Mrs M paid 鈥淎鈥� rate Class 1 NICs of 拢11.15. The EF derived from that amount of NICs is 拢194.78. When the increase in the EF is taken into account 鈥� the specified amount for that tax year is 拢14.00 - Mrs M needs to pay 37 Class 3 NICs in order to make the year a QY.

For details of:

  • the conditions of eligibility, see NIM25103
  • the rate of Class 3 NIC payable, see NIM25110.