HMRC has issued a response after the idea was raised to provide tax refunds for people who have overpaid National Insurance contributions towards their state pension.
A person typically needs 35 years of National Insurance contributions to get the full new state pension but many workers will pay the tax for longer than this over the course of their working lives.
A taxpayer contacted the Government body over X to ask: “I know that to get my full state pension I need to pay up to 35 years of National insurance contributions which I have done.
“I now hear that if you have paid over 40 years of contributions there is also a tax refund of some kind or a reduction in National insurance you pay?”
HMRC spelled out the rules in response. The group said: “The only reason you may be entitled to a tax refund would be if the level of your earnings is below the tax-free personal allowance or if an incorrect tax code has been operated.
“Similarly, the amount of National Insurance you pay would only reduce if your earnings also reduced.”
To get the full basic state pension, you typically need 30 years of contributions.
The full new state pension is currently £221.20 a week while the full basic state pension pays £169.50 a week.
The earnings figure used for the triple lock came out today (August 10), suggesting state pension payments could increase four percent next year, with the full new amount increasing by £460 a year.
But one expert said payments could increase by more than this. Yiannis Zourmpanos, financial consultant and senior contributor at Bountii, pointed out that the earnings figures can change.
He commented: “The Office for National Statistics (ONS) often revises its earnings data, which means the state pension increase you’re expecting might not be the one you’ll get.”
The analyst further explained: “The ONS has been known to provide updated figures that more accurately reflect the actual earnings growth over a given period.
“This means that by the time the final calculations are made, we could see a different percentage being used for the state pension uprating.”
The expert also said the state pension increase could differ from today’s earnings figure as inflation could prove to be the key metric.
Mr Zourmpanos warned: “While inflation was recorded at 2.2 percent in July, we’re not out of the woods yet.
“Inflation tends to be unpredictable, and if it spikes before the key September data is released, it could outpace earnings growth.
“If that happens, inflation—not earnings—will determine the state pension increase for 2024. And given the rising costs of essentials like food, energy, and housing, inflation could indeed take the lead.”
