Money tip #23 – If you continue to work after the state retirement age make sure you stop paying National Insurance

What are National Insurance contributions

You pay National Insurance contributions (NICs) throughout your working life, from age 16, in order to build up your entitlement to the State Pension and to certain social security benefits. The type and level of NICs you pay depends on your earnings and whether you're employed or self-employed. However you stop paying NICs when you reach state retirement age.

What is the state retirement age?

The state retirement age s is 65 for men and 60 for women born on or before 5 April 1950 - but it will gradually increase to 65 for women over the period 2010-2020.

What happens at state retirement age?

Once you're over State Pension age you don't have to pay Class 1 or Class 2 NICs if you carry on working. You'll only have to pay them on any earnings that were due to be paid to you before you reached State Pension age.

However, if you're self-employed, because Class 4 NICs are an annual charge, you may still have to pay them on any taxable profits for the year in which you reach State Pension age. You will be exempt from payment from the beginning of the following tax year.

So how do I stop paying National Insurance Contributions

If you stay in employment or self-employment after State Pension age, you can apply to HM Revenue and Customs (HMRC) for an Age Exception Certificate so that you don't pay NICs. You can write to:

HM Revenue and Customs
National Insurance Contributions Office
Evening Work Centre
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

Make sure you provide your name, address, contact number and your National Insurance number. Once you receive your certificate from HMRC give it to your employer. This will allow them to stop deducting NICs from your earnings. Alternatively, you can show your birth certificate or passport as evidence that you have reached State Pension age.

If you're self-employed and have reached State Pension age, you can stop making NICs payments (though Class 4 may be due on your taxable profits in the year during which you reach State Pension age, as described earlier). The Age Exception Certificate, though not required if you're self-employed, will provide useful evidence of your age should you be asked.  (source www.nidirect.gov.uk)