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HMRC internal manual

National Insurance Manual

Class 3 NICs: Additional Class 3 NICs: Number of NICs payable

Regulation 2 of, and Schedule 1 to, the Social Security (Earnings Factor) Regulations 1979

Regulation 2 of, and Schedule 1 to, the Social Security (Earnings Factor) Regulations (Northern Ireland) 1979

[## Regulation 2 of, and Schedule 1 to, the Social Security (Earnings Factor) Regulations 1979

Regulation 2 of, and Schedule 1 to, the Social Security (Earnings Factor) Regulations (Northern Ireland) 1979

](https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim25001) explains the meaning of “qualifying earnings factor” (more commonly known as “a qualifying year” (“QY”)). In the case of an individual who reaches State Pension age before 6 April 2010, for the purposes of the second contribution condition for entitlement to basic State Pension:

  • in respect of the 1975/76, 1976/77 and 1977/78 tax years, a QY is one in which:

    • the individual has paid, treated as having paid, or been credited with, Class 1, Class 2 or Class 3 NICs and/or earnings; and
    • the earnings factor (“EF”) derived from such NICs and/or earnings is not less than 50 times the lower earnings limit (“LEL”) for the tax year in question
  • in respect of the 1978/79 and subsequent tax years, a QY is one in which:

    • the individual has paid, treated as having paid, or been credited with, Class 1, Class 2 or Class 3 NICs and/or earnings; and
    • the EF derived from such NICs and/or earnings is not less than 52 times the LEL for the tax year in question. Regulation 2, though, provides that, where the EF derived from

Class 1 NICs and/or earnings which have been paid, treated as paid, or credited is short of the qualifying earnings factor by not more than a specified amount, then the EF is increased by up to the amount of that specified amount.

Example

Mrs M satisfies the conditions of eligibility for paying additional Class 3 NICs for the 1975/76, 1976/77 and 1977/78 tax years. All three years are non-QYs.

In the 1975/76 and 1976/77 tax years, Mrs M did not pay, was not treated as having paid, or credited, with any NICs. In order to make either year a QY, she will have to pay 50 Class 3 NICs for each one.

In the 1977/78 tax year, though, Mrs M paid “A” rate Class 1 NICs of £11.15. The EF derived from that amount of NICs is £194.78. When the increase in the EF is taken into account – the specified amount for that tax year is £14.00 - Mrs M needs to pay 37 Class 3 NICs in order to make the year a QY.

NICO has specific spreadsheets to calculate:

  • the number of Class 3 NICs required to make a tax year a QY where no NICs of any class have been paid, have been treated as paid, or been credited, in the year
  • the number of Class 3 NICs required to make a tax year a QY where some Class 1 NICs have been paid, have been treated as paid, or been credited, in the year.For details of:

  • the conditions of eligibility, see NIM25103
  • the rate of Class 3 NIC payable, see NIM25110.