National Insurance contributions impact state pension and Britons may need to act urgently | Personal Finance | Finance

February is coming to an end, meaning it’s only a matter of weeks until the new tax year begins. Ahead of the tax year end on April 5, Britons are being urged to check whether they need to take action.

This is because the end of the tax year also serves as a cut-off for certain things.

For example, some annual allowances reset when the new tax year begins.

As such, there is a risk of missing out on the annual allowance for that tax year – unless the person acts prior to the tax year end.

Furthermore, the way in which the Easter bank holidays and weekend falls this year means last-minute efforts to beat the deadline could bring their own challenges.

It’s an issue which Simon Goldthorpe, joint executive chairman at Beaufort Group, has issued a warning about.

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Thanks to the Easter holiday, many people won’t be around to process last-minute deposits this year, he warned, as April 5 falls on Easter Monday bank holiday.

On top of that, the Friday before, on April 2, is also a bank holiday.

As a consequence, Mr Goldthorpe said now is the time to be planning around this, so people don’t miss the deadline.

He suggested the last working day before Easter – April 1 – is the day which anything savers need to get sorted should be arranged by.

As the start of April nears, Mr Goldthorpe has outlines seven key allowances and limits people should take a look at, to be ready for the “unusually early tax year end”.


Among his suggestions is the topic of National Insurance contributions – and he has pointed out it could have a knock-on effect on state pension entitlement.

“Less well-known but still important is if you’ve missed any National Insurance contributions in the last five years and would like to make up the difference, you can do so by paying for extra state pension entitlement,” Mr Goldthorpe commented.

“It’s important to note that this has a limit of six years for the end of the tax year for which the contributions are paid.”

People who want to make use of the annual pension allowance also have the fast-approaching deadline to consider.

“Make sure you’ve contributed as much as you can to a pension,” he said.

“The annual limit is £40,000 per person. If you’ve maxed yours and have spare cash, consider adding to a spouse’s annual allowance if they have spare.”

Britons also have an annual allowance relating to their Individual Savings Accounts (ISAs).

In the 2020 to 2021 tax year, the most a person can pay into their ISAs is £20,000.

“Make sure you’ve topped up your ISAs to their maximum potential of £20,000,” Mr Goldthorpe said.

The same warning goes for Junior ISA savers.

“If you have kids under 18, make sure they’ve had their full allowance contribution.

“The allowance was more than doubled last year from £4,368 to £9,000 – if you’ve missed that it would be easy to not realise you could add more.”

Couples who are married or in a civil partnership and want to claim the Marriage Allowance may also want to heed the warning.

“If your spouse earns under the annual allowance of £12,500, you can transfer up to £1,250 to them each year to spread the load,” Mr Goldthorpe explained.

“Marriage tax allowance can be claimed back up to five years assuming you qualified in each of those years.”

Inheritance Tax (IHT) and Capital Gains Tax (CTGT) could also be something some want to consider ahead of the tax year end.

Mr Goldthorpe said of IHT: “Every year you have an allowance of £3,000 for cash gifts.

“If you miss a year you can carry it forward, but only for 12 months. You can also gift £5,000 to a child getting married, or £2,500 to a grandchild.”

Addressing CGT, he added:“Make sure if you have any investments or assets that are due for disposal that you do it ahead of the new tax year to maximise your £12,300 allowance.

“This is especially important in light of possible CGT changes from the Government.”

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