NIM25008 - Class 3 NICs: Restrictions on the right to pay: precluded Class 3 NICs: earnings factor is less than 52 times the lower earnings limit

Regulation 49(1)(b) and (c) Social Security (Contributions) Regulations 2001

Regulation 4 Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001

As explained in NIM25001, a person is not entitled to pay (i.e. is precluded from paying) Class 3 NICs where they have a qualifying earnings factor which is 52 x the lower earnings limit (LEL). Up until 6 April 2017 this regulation was subject to the qualification in NIM25011. From 6 April 2017 the payment of Class 3 NICs now only provides for entitlement to new State Pension and the qualifications in NIM25011 no longer apply.

They cannot pay Class 3 NICs for any tax year for which the aggregate of their earnings factors (EFs) derived from:

  • earnings on which primary Class 1 NICs have been paid at the main primary percentage rate (see NIM01110)); or
  • credited earnings; or
  • Class 2 NICs paid; or
  • Class 3 NICs paid or credited

is less than 25 times the LEL for the tax year in question (regulation 49(1)(b))

or

is more than 25 times the LEL but less than the qualifying earnings factor for the tax year in question (regulation 49(1)(c))

And either:

  • The period within which any Class 3 NICs may be treated as paid for the tax year under regulation 4 has passed; or
  • before that date has been reached, the person has applied, under regulation 56 (NIM38501), for a refund of any precluded Class 3 NICs paid for that year.

For the purposes of the above, “credited” means credited for the purposes of new State Pension, widowed mother’s allowance, widowed parent’s allowance and widow’s pension.

Example

Mrs Napier pays ten Class 3 NICs for the 2015-16 tax year. The EF derived from those is £1,120. But having paid the ten NICs she decides in June 2015 that she doesn’t want to pay the other 42 weeks of NICs which would make the year a qualifying one. Instead she asks for a refund of the ten weeks of NICs paid.

The EF of £1,120 is less than 25 times the LEL for the 2015-16 year. The time by which Class 3 NICs are, for that year, treated as paid for benefit purposes under regulation 4 is 5 April 2023 (see NIM25044 for information on extended time limits under regulation 50C of SSCR 2001). As Mrs Napier has applied for a refund of the ten NICs before that date those NICs are precluded.

The fact that she was not precluded from paying the NICs in the first place by any of the circumstances in NIM25005 is immaterial. The NICs have, in essence, become precluded.