HM Revenue & Customs has confirmed that around 800,000 self-employed taxpayers may have gaps in their National Insurance records because their self-employment status was not properly documented.
The issue has been ongoing since 2015. It could impact those who have filed Self Assessment tax returns as self-employed but failed to register for self-employment for National Insurance contributions.
Likewise, this does not indicate that the records of all 800,000 taxpayers are inaccurate. However, HMRC believes these individuals may have gaps connected to the registration issue. Essentially, all those with a trading history since 2015, or who became self-employed in 2015, should review their records, particularly if there are discrepancies between their National Insurance record and their tax returns.
Who Could Be Affected?
The issue applies to a minority of people within the Self-Assessment system. It does not affect every sole trader, freelancer or contractor.
A person may be affected if they declared self-employed income through Self-Assessment, but HMRC’s National Insurance system did not correctly recognise their self-employment status. Besides, HMRC and DWP are likely to prioritise individuals who have reached State Pension age, or who are two years away from doing so. This is because any missing qualifying years could have a more immediate effect on their pension entitlement.
People who are further away from State Pension age may also be affected, but HMRC plans to provide a separate digital route for them in 2027.
Why the Gaps Matter
Class 2 National Insurance has traditionally helped self-employed people build qualifying years for the State Pension and certain contribution-based benefits.
If the contribution is not properly registered, the tax year could not be considered a qualifying year. For some taxpayers, this could reduce the amount of State Pension they receive.
“However, an incomplete year does not automatically mean that a person’s pension will be lower.”
They may already have enough qualifying years, or the year may be covered through National Insurance credits, employment, caring responsibilities or another qualifying reason.
For this reason, taxpayers should not immediately make voluntary National Insurance payments simply because they see a gap. GOV.UK warns that voluntary contributions do not always increase a person’s State Pension. Paying without first checking the position could result in unnecessary payments.
What Taxpayers Should Do Now
Self-employed taxpayers should review their National Insurance record through GOV.UK and compare it with their historic Self-Assessment returns, accounts and evidence of self-employment.
They should also check their State Pension forecast to understand whether an incomplete year is likely to affect their future entitlement.
“Where a mismatch appears, taxpayers should keep copies of relevant tax returns, payment records and HMRC correspondence.”
They should first establish why the gap exists and whether correcting it would improve their pension before making any payment.
Any letter claiming to be from HMRC should also be checked carefully before personal details or payment information are provided.
How Lanop Can Help
Historic National Insurance problems may require more than checking one online figure. Self-Assessment returns, registration records, contribution histories and pension forecasts may need to be reviewed together.
Lanop Business & Tax Advisors has supported UK taxpayers since 2009. Its team works with sole traders, freelancers, contractors and other self-employed individuals on Self-Assessment and HMRC compliance matters.
Lanop can review historic records, identify possible inconsistencies and help taxpayers understand the correct steps before contacting HMRC or making voluntary contributions. This can help genuine errors to be addressed while reducing the risk of paying contributions that provide no additional pension benefit.
Anyone concerned about a National Insurance gap should review their position carefully and seek professional guidance before making a payment or responding to an HMRC letter.
