NIM25041 - Class 3 National Insurance contributions: Deficiency Notices: background

Prior to 1998, Class 1, 2 and 3 National Insurance contributions, credits and credited earnings were recorded on the National Insurance Recording System (NIRS). This information was used to determine a contributor’s entitlement to various state benefits.

Approximately 15 months after the end of each tax year, NIRS performed a scan to identify contributors who had not paid, or been credited with, enough contributions to make that year count towards their basic State Pension.

The contributors were then sent a letter known as a Deficiency Notice inviting them to consider paying Class 3 National Insurance contributions on a voluntary basis to make up the gap. The Deficiency Notice also showed the actual amounts paid and/or credited. This enabled the individual to check that all contributions paid and/or credited had been recorded. The annual exercise was suspended in 1998 with the last of the 'old' Deficiency Notices being issued in 1997 for the 1995-96 tax year.

1996-97 to 2001-02

In 2003 the former Inland Revenue performed a 'catch up' exercise issuing Deficiency Notices for the 1996-97 to 2001-02 tax years. This gave contributors the opportunity to pay Class 3 National Insurance contributions for these years. Because of the delay in issuing Deficiency Notices, the normal provisions for time limits and higher rates do not apply to the payment of Class 3 National Insurance contributions for the 1996-97 to 2001-02 years. The special provisions for these years are shown at NIM25043.

2002-03 onwards

The annual Deficiency Notice exercise has been re-instated for 2002-03 onwards. Details of the annual Deficiency Notice exercise are shown at NIM25042.