National Insurance poser

[retirement man]

I wonder if you can help me please.?
I am taking early retirement (late 50’s) and have received confirmation from the Pension Agency that I have contributed the 44 years I need for the eventual state pension as apparently they “throw in “ 5 years at the end, therefore I do not need to
pay anymore N.I. contribs. I have been paying contracted out class 1.

I am going to work part time either a couple of days a week in paid employment or set up a consultancy under sole trader rules, I am aware of IR35 etc.

My question is what will be my future NI liability?

I will be receiving a pension of 25k and with 5k personal allowance this means I will pay tax at lower rates on 20k but no NI.

If I earn say 25k part time, either paid or sole trader, my total income becomes 50k and as you pay NI up to £34840 at full rate, and as I will not have paid NI on my pension, my marginal top rate will become 51% or 48% in retirement as opposed to 41% in full time employment (40% tax and 1% NI over upper limit).
This cannot be right, what have I done wrong or am I caught in some trap? Or as I have “earned” my 44 years am I not liable for these NI rates?
Thanks in advance for your interest.

[Peter D]

If you have contributed 39 whole years of NI then a year of NI contibutions is added to the 39 as each year passes so in 5 yeras you will hit the 44 years to max the state pension. There is an edition to that payment which is besed on gross income, but is is small. The complication comes when yopu are re-employed under PAYE as this automatically triggers NI contributions on that pay, not you pension. Speak directly with the pension department that porovided your pensions projection and check if there is a way out of this. Regards Peter

[tax me less!]

Peter is incorrect. You only need 30 years to get the maximum basic state pension.

Because you don't need to pay any more NI you should arrange future employment in a more cost efficient way eg through an LLP so that at least the Class 4 you pay is a cheaper tax than Class 1.

[retirement man]

Doesn't a LLP only confer me the same NI rates as a sole trader, in this scenario would I not be better as a ltd co and take divis as well?