Under Prime Minister Andy Burnham's new Labour government, HMRC has identified a National Insurance Contributions (NIC) gap that could affect as many as 800,000 self-employed taxpayers across the UK, potentially reducing their state pension entitlement. The issue primarily impacts individuals who started working for themselves between 2015 and early March 2024 but failed to notify HMRC by completing form CWF1.
HMRC is preparing to contact those affected, warning that the shortfall could significantly reduce the pension payments they receive. Around 160,000 of those affected are already at or approaching state pension age, making the matter particularly urgent for this group.
Burnham's Pension Promises and the Triple Lock
Mr Burnham, the Makerfield MP, has already outlined his state pension policies, including maintaining the Triple Lock, which ensures pensions rise by the highest of inflation, average earnings, or 2.5%. He has also confirmed that state pensioners living solely on their Department for Work and Pensions (DWP) state pension will not pay tax to HMRC.
However, despite Mr Burnham's promise of a "cost of living" Cabinet, the discovery of these NIC gaps has raised concerns. The gaps affect self-employed workers who did not register with HMRC via form CWF1, a step required for Class 2 National Insurance contributions, which count towards state pension entitlement.
Urgent Action for Those Near Retirement
HMRC will begin its outreach by writing to those who are within two years of reaching state pension age, prioritising the most time-sensitive cases first. All affected taxpayers are expected to receive correspondence by summer 2027, with letters starting from spring 2027.
The letters will direct recipients to contact the DWP to check the impact on their State Pension. DWP will also help individuals determine whether it is worth paying voluntary contributions to fill any gaps in their National Insurance record.
Government Response and Timelines
Mr Burnham has appointed John Healey as Chancellor, who will oversee HM Treasury and HMRC. The outreach programme is set to continue into 2027, well before the next general election, which is not scheduled until 2029.
This issue predates Mr Burnham's premiership, which began this year, but his government is now responsible for addressing it. The DWP and HMRC are working together to ensure affected individuals can check their records and take action to protect their pension income.
