Do You Pay National Insurance on Pension Income?

National Insurance Contributions finish when you reach state pension age, so you won’t pay NI on any pension payments or other income. You might still have to pay income tax though, if your taxable income exceeds the personal allowance.

NI for retiring self-employed people

It’s also worth keeping in mind that if you are self-employed and your earnings hit the threshold, then you may still have to pay Class 4 NI for the tax year that you reach state pension age. When you retire, remember to let HMRC know that you have stopped working! You will need to send them your final Self Assessment tax return.

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When does National Insurance start and stop?

National Insurance Contributions are payable from the age of 16 until state retirement age. The amount of NI that you have to pay depends on how much money you earn, and whether you’re employed or self-employed. Check the current NI rates and thresholds in our article.

You may pay the Health & Social Care Levy depending on when you stop work. Learn more about it here.

What happens if I retire early?

Some people retire before the retirement age. It might be possible to receive your company or personal pension early, – this is something that your employer or their pension scheme can advise you on. There might sometimes be tax implications for taking money out of your pension pot early, which is something to watch out for.

Even if you retire early, you won’t receive your state pension until you reach state retirement age. Early retirement might also mean that the amount of state pension you eventually receive is less. This is because you might not have made enough NI contributions. You can check your National Insurance record online to see how many qualifying years of contributions you have made.

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About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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jean wilson

27th July 2020 4:52 pm

I plan to retire at 60 in 2022. I have an NHS pension but can’t get my state pension until I’m 67. Will I still pay NI contributions until I get my state pension? I will have paid in 44 years of full NI contributions. Also will I pay tax on my lump sum from my NHS pension?

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Elizabeth Hughes

31st July 2020 9:25 am

Reply to jean wilson

Hi Jean, thanks for your message. You don’t pay National Insurance contributions (NICs) on any payments that you receive from a pension scheme, including an annuity, but you may be liable to income tax on these payments. You will continue to pay NI on income such as employment and self employment until you reach state pension age. Pensions are taxable income, but you can take 25% tax free. Pension providers often issue a P60 and sometimes they deduct tax. There is a P55 form that can be filled in to reclaim tax on flexibly accessed pensions. It’s a bit of… Read more »