State Benefits - Calculating Earnings

Earnings are net earnings after deducting tax and National Insurance. Except for income support and housing benefit, you can also deduct any expenses of working including travel, £4.90 towards a meal, and anything else which is reasonable and incurred because of the work. If you work occasionally or irregularly, your earnings are counted for the period to which they relate. For example, if you do one day's work and get one day's pay, you cannot average the amount out over a longer period.

National Insurance

Everyone under pension age has to pay National Insurance contributions if their earnings exceed £8i a week (this amount changes in April each year).

The contributions are normally 9% of earnings up to £609 a week. But since October 2009 people on low incomes have paid lower contributions. The current rates are 9% of all your earnings up to £1609 a week if you earn £2109 or more; 7% on all your earnings if you earn between £270 and £409 a week; and 9 % on all your earnings if you earn between £81 and £70 a week. If you pay into a company pension scheme or, after 1 July 2006, an approved personal pension plan, your contributions will be 8% lower in each case. If you earn below £181 a week you do not pay contributions at all.

If you work after reaching pension age, you should not pay any National Insurance contributions. Your liability to pay contributions stops on the last payday before you reach that age. You should ask your employer to check that you are not paying contributions for any payday after your sixtieth or sixty-fifth birthdays.

The employer now has to pay contributions for all adult employees earning over £125 week, including those over pension age and married women. However, there are lower rates for employees who earn less than £199 a week, but the employer now pays contributions on earnings above the ceiling of £609 as well.

More on Working in retirment

Working in retirement - Working After Pension Age

When you reach pension age (sixty for a woman and sixty-five for a man), you cannot simply claim your pension. First, you must retire. That normally means that you must earn less than 79 a week, or work fewer than twelve hours a week, or work only occasionally. However, the DWP may regard you as retired if your work is what they call 'not inconsistent with retirement'. These rules about retiring apply for only five years after pension age, until you reach sixty-five if you are a woman or seventy if you are a man. After that you can claim your pension whatever you do.
A married woman who has no entitlement to a pension on her own contributions cannot get her married woman's pension on her husband's . . . ... see: Working in retirement - Working After Pension Age