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HMRC internal manual

National Insurance Manual

Credits: post-1975 credited earnings (credits): overview

From 6 April 1975, in line with the move away from a flat rate contribution to a contribution liability based on earnings, Class 1 credits were awarded at a standard rate equivalent to a payment of weekly earnings at the lower earnings limit in force at the time. From 6 April 1987, instead of a Class 1 credit being awarded, a person is instead credited with an amount of notional earnings equivalent to the Lower Earnings Limit (LEL) in force at the end of each pay week (Saturday to Sunday). However, “credited earnings” are normally referred to as “credits”, although this is not the term used in legislation so may not be appropriate in a formal legal document. Class 3 credits continue to be credited contributions.

The customer’s NI record shows an amount of “earnings” for the period for which credits are due, and the number of “credit”.

For example,

If a person is entitled to be credited with earnings for 6 weeks during the 2004-2005 tax year, their NPS account will show earnings of £474 (6 X £79) and the number of weeks (6) this represents. These “earnings” can help the customer qualify for a range of contributory benefits but are not included in calculations of the total earnings figure used in SERPs or state second pension. Under the rules of 1975 Social Security scheme there is no link between a person’s past employment history and the award of credited earnings However, a person claiming state benefits cannot rely entirely on credited earnings to satisfy the contribution conditions for contributory benefits and must have a minimum earnings factor from paid Class 1, Class 2 or Class 3 NICs, depending on the benefit claimed. Customers should be advised to ask DWP for an explanation of any benefit entitlement they may have based on their NI record.

The range of non-benefit credits available has been increased since 1975 to include:

  • Class 3 starting credits, see NIM41210
  • Special credits, see NIM41215
  • Approved training credits, see NIM41220
  • SSP, SMP, SAP, and ASPP credits, see NIM41225
  • Jury service credits, see NIM41230
  • Disabled Persons Tax credit see NIM41235
  • Working Tax Credit credits, see NIM41236
  • Stayed credits (Miscarriage of Justice cases), see NIM41240
  • Autocredits, see NIM41245
  • Credits for Parents and Carers see NIM41250
  • Credits for certain spouses and civil partners of members of HM Forces see NIM41265 and NIM41270

Only Starting Credits and Stayed Credits are available to married women who have elected to pay reduced rate contributions.