Should you be paying National Insurance as a UK Expat?

 

When you live and work abroad, you are no longer a UK resident and are no longer obliged to pay UK National Insurance (except in special circumstances, such as working for the government or in the Armed Forces). While this may sound like good news, you should keep in mind that paying National Insurance entitles you to various benefits, like State Pension, Employment and Support Allowance or bereavement benefits. Living abroad and not paying UK National Insurance Contributions (NICs) may restrict your access to these benefits – not only now, but also in the future.

National-Insurance-for-UK-expats

UK State Pension Qualifying Years

In order to qualify for British State Pension, you must have accumulated a certain number of “qualifying years” when you paid or were credited with NICs. Under the new rules, effective for those reaching State Pension age on or after 6 April 2016, you need at least 10 years of NICs to be eligible (at all) and at least 35 years for a full State Pension. If you have between 10 and 35 qualifying years, your State Pension will be reduced accordingly.

A typical working life, lasting from your 20’s to your 60’s, obviously doesn’t leave much leeway for meeting the 35 years requirement. Any gaps in your National Insurance contributions, such as when living abroad, can cost you a lot of money in the future.

Paying National Insurance when Living Abroad

If you are working for a UK based employer, who sends you overseas for a limited period of time (up to 2 years), you may be able (and required) to continue paying UK NICs as usual. This is the simplest case and your employer should be able to give you guidance.

If you are working in a European Economic Area country (EU plus Norway, Iceland and Liechtenstein) or in Switzerland, you can pay social insurance contributions in your new country of residence and have the years credited to your 10 years threshold (but not to the 35 years required for full State Pension). If your total years from the UK and EEA National Insurance exceed 10, you will be eligible for UK State Pension, but the amount will be proportional only to your UK qualifying years. Depending on local rules, you may also be entitled to the other country’s state pension.

In other cases you can choose to pay UK National Insurance voluntarily, in order to avoid gaps and not lose your UK State Pension and other benefits. Subject to eligibility criteria, you can pay either Class 2 or Class 3 NICs.

Class 2 is cheaper (£2.75 per week in 2014-15) and provides access to a wider range of benefits (some of them only after you have returned to the UK). But it also has stricter requirements, particularly to have been “ordinarily” employed or self-employed immediately before leaving the UK.

Class 3 is much more expensive (£13.90 per week in 2014-15) and does not give you access to Employment and Support Allowance when back in the UK. However, the effect on your State Pension is the same for both classes.

How to Start Paying UK NICs as an Expat

You can apply using form CF83 (Application to make National Insurance Contributions abroad). For detailed information it is best to visit the HMRC website or contact HMRC directly if you have specific questions.

 

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