One of the budget changes that stood out were new measure to stops UK expats from topping up their UK state pension contributions using Class 2 and Class 3 National Insurance Contributions (NIC). This change comes into effect on 6 April 2026.
People who live outside the UK can make voluntary NIC payments to top up their UK state pension rights.
There are currently two options:
Class 3 NIC – at a cost of £17.75 per week (£923 p.a.).
Class 2 NIC – at a cost of only £3.50 per week (£182 p.a.). For the self employed.
Requirements to qualify at present
Class 3 NIC is available to anyone living outside of the UK who had previously worked in the UK as an employee and as self-employed.
Class 2 NIC is restricted to persons who have been self-employed in the UK just before leaving and have lived in the UK for at least 3 years. This is also available to those expats who can prove self-employment in their country of residence.
The changes from 6 April 2026
Class 3 NIC will only be available to persons who have lived in the UK for at least 10 years before moving abroad.
Class 2 NIC will not be available at all.
People who temporarily stop work can fill in the gaps
Why pay Class 2 or 3 NIC at all?
- To receive the full UK pension a person must pay NIC for 35 years.
- The full state pension under the latest rules is just under £12,000 p.a.
- Every year of extra NIC contributions (up to a maximum of 35 years) is worth £343 of additional annual pension, and this is for life. (£12,000 ÷ 35)
- So, as long as you live for 3 years after pension age (currently 66 – rising to 67 soon) you are going to make a big profit on your NIC ‘investment’-
- If you live up to 79 years old (UK average male/female life expectancy) you will receive 13 years of extra UK state pension.
- That’s a total return of £4,459 for a small investment to pay 1 year of NIC (£923 – Class 3 or £182 – Class 2). An amazing return especially considering that the UK pension is inflation linked (Triple Lock) and guaranteed by the UK Treasury.
- The investment return is extraordinary if you are self employed and can claim Class 2.
It’s not hard to understand why Rachel Reeves has stopped this amazing deal for expats, especially as working expats will be paying into the social security system of their new country of residence and will be acquiring pension rights in those countries.
A few other points of interest concerning state pensions:
- A person who lives in Spain can actually pay into both the UK and Spanish systems and get two pensions.
- The UK requires a minimum of 10 years contributions and Spain requires 15 years.
- The bilateral social security agreement between the two countries allows the accumulation of qualifying contribution years of both systems. This enables a person who has not paid enough years in either country to use the other countries’ years of contributions to make up the minimum number of years.
What should you do if you live in Spain and you have paid into the UK system for less than 35 full years?
Without doubt you should pay Class 3 contributions to the UK system whilst you still can. Even better if you are self employed in Spain as you can pay the much cheaper Class 2.
If you only worked in the UK for 4 years you can still benefit if you act quickly because you can pay 6 years in one go and secure 10 years of contributions and a UK pension of about 30% of the full pension, inflation linked.
You have until 5 April to do this and you can pay up to 6 back years plus the remaining weeks of 2025/26.
A few links to help you find out more:
https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions
https://www.gov.uk/voluntary-national-insurance-contributions
https://www.gov.uk/self-employed-national-insurance-rates
https://www.gov.uk/pay-voluntary-class-3-national-insurance
Warning: This article is not a substitute for individual professional advice especially for a complex subject such as this and persons should seek personalised professional advice before acting or refraining from acting
