National insurance credits for limited capability for work

While getting national insurance (NI) credits for LCW is important for future entitlement to contribution-based benefits, such as state pension, entitlement can also help with getting universal credit (UC), or extra amounts of UC, quicker than would otherwise be the case. Henri Krishna looks at when someone should get these NI credits, how they are claimed, and some of the advantages of getting them.

A person entitled to employment and support allowance (ESA) is entitled to NI credits for limited capability for work (LCW). However, someone with LCW can also be entitled to these NI credits if their ESA award ends or even if they are not entitled to ESA. Entitlement without an ESA award is commonly referred to as an ‘ESA credits only’ award, but is not in fact an award of, or necessarily dependent on a claim for, ESA. NI credits for LCW cannot be awarded for periods when someone is entitled to UC (which gives entitlement to its own NI credits), unless they are entitled to ESA too.

If not awarded NI credits for LCW automatically, they must be claimed. The DWP administers claims for NI credits, and while those for LCW are not necessarily linked to ESA, the DWP’s preferred method is use of the ‘new-style’ ESA claim form. If using the online ‘new-style’ ESA claim form, the claimant can choose to make a ‘credits only claim’ by ticking the appropriate box when prompted.1If you do not meet the NI contributions for ‘new-style’ ESA, you are asked ‘What do you want to do?’ You should choose ‘Continue to apply for New Style ESA. I understand that I might not get a payment, but I may get Class 1 National Insurance credits’. This remains the best way to claim if it is not awarded automatically.

A person should be able to claim without using the ‘new-style’ ESA claim form. The rules governing such claims (regulation 8B(4) of the Social Security (Credits) Regulations 1975, SI No.556 – the ‘Credits Regulations’) requires only that they ‘furnished to the Secretary of State notice in writing of the grounds on which he claims’. As such, any written application, including arguably a previous claim for UC, should be sufficient – but how the authorities deal with such applications is not clear.

To get these NI credits for any tax year, they need to be claimed before the end of the following ‘benefit year’ (roughly the calendar year), or any longer period considered reasonable in the circumstances. The ESA time limits do not apply. So, a claim made in June 2024 should cover at least the period back to the start of the 2022/23 tax year – ie, the start of April 2022.

If not already assessed as having LCW (eg, for an ESA award ended due to 365-day time limiting or other income being too high), a claim for NI credits for LCW requires an assessment. Regulation 8B(2) of the Credits Regulations requires that each day was, or would have been, a day of LCW for the purposes of Part 1 of the Welfare Reform Act 2007 – ie, a day on which you would have been entitled to ESA if you had, or could have, claimed it at the time. As such, you should initially provide medical evidence (eg, ‘fit notes’) and then complete the work capability assessment (WCA), as if claiming ESA. If you fail the WCA, you can appeal.

For claiming these credits while a student, see ‘UC and disabled students – an update’ (Bulletin 287).

In practice, the DWP automatically continues to award NI credits if an ESA award ends for a reason other than being found not to have LCW – eg, due to time limiting of contributory ESA, or if income is too high for income-related ESA. However, this does not seem to be DWP practice where someone has LCW and their UC award comes to an end.

It is very arguable that, as for ESA, a UC award ending, other than because the person no longer has or is treated as having LCW, means that the LCW determination stands.2In relation to an old-style ESA rather than UC, the DWP confirms this at para 20 of JW v SSWP (UC) [2022] UKUT 117 (AAC) As someone with LCW but no UC award, they should be entitled to NI credits for LCW – eg, by treating the UC claim as a claim for the credits.3Again, at para 20 of JW: the DWP confirms that the ESA claim is treated as an NI credits claim, but given that UC entitlement is not dependent on LCW, and NI credits for LCW are not awarded if only getting UC, the DWP may be unlikely to accept a UC claim as an NI credits claim. But as the DWP does not appear to do this routinely, a person in this situation should request, in writing, the credits on the basis that they already have LCW. Failing that, they can claim the credits – eg, using the online ‘new-style’ ESA claim form, from the date the UC award ended.

Regulation 21 of the Universal Credit (Transitional Provisions) Regulations 2014 (the ‘TP Regulations’) deals with ‘credits only’ transitions to UC. Straightforwardly, it concerns migration from legacy benefits to UC, where a claimant is getting NI credits for LCW, but not old-style ESA, when they claim UC. The rule allows for a claimant to be treated as having LCW or, in relevant cases, limited capability for work and work-related activity (LCWRA) from the start of the UC award ('LCWRA and migration to UC' for more about LCWRA in this situation).

Arguably, the rule could also apply where the claimant is a ‘credits only’ case but was previously getting UC or ‘new-style’ ESA. This argument has not been tested and seems unlikely to be accepted by the DWP (on the basis that it does not involve migration to UC). However, the argument is that regulation 21, although referring to the ‘old-style’ test of LCW (ie, the work capability assessment provided for in the Welfare Reform Act 2007) uses a notional test. That is because regulation 21(2) and (4) refer to the situation where the claimant ‘would have’ satisfied that test ‘if he or she was entitled to old style ESA’. Arguably, that could apply to a former UC or ‘new-style’ ESA claimant who ‘would have’ have had LCW (or LCWRA) under the 2007 Act if they could instead have been on old-style ESA.4Para 7.15 of the Explanatory Memorandum to the TP Regulations supports this interpretation: ‘… they may be entitled to the LCW or LCWRA element in UC from the start of the first assessment period, on the basis of … an assessment whilst the claimant is in receipt of UC …’.

If that argument were successful, such a claimant would (as in an actual transition to UC case) have LCW and, in relevant cases, LCWRA (including the element) from the first assessment period of the new UC award.

If a claimant is soon to migrate to UC (either ‘naturally’ or ‘managed’), is sick or disabled but not already assessed as having LCW or LCWRA (eg, if only getting tax credits, a disability benefit and housing benefit), it may be beneficial to make a NI credits for LCW claim. Given that a claim covers the tax year prior to the benefit year in which it is made, a successful award should mean regulation 21 of the TP Regulations applies, as described above, once UC is claimed.