NATIONAL INSURANCE - 06.10.2020

Are you too late to claim an NI refund?

For some years you’ve simultaneously been an employee or director of a few companies. You’ve paid NI contributions on your earnings from each and you think you might have paid too much. Are you too late to claim a refund?

National Insurance v tax

Generally, HMRC reviews your tax position every year, either through self-assessment or by using its own formal and informal assessment procedures. Therefore, you can usually be reasonably certain that ultimately you’ll pay the right amount of tax based on the information HMRC has. On the other hand, its approach to NI is sketchier. The system is less joined up than that for tax and if you pay too much NI there’s a good chance HMRC won’t spot it.

When can overpayment occur?

While errors in NI can come from incorrect information being entered into your company’s payroll software, there are other more common reasons for paying too much NI. These are caused by the somewhat peculiar way that the NI system works. The situations in which overpayments occur even where the calculations have been made correctly are:

  • you are appointed or resign a directorship part-way through a tax year
  • you have more than one employment or directorship on which you pay NI
  • you are self-employed or in partnership as well as being an employee or director and pay NI on your profits and salary.

For detailed commentary on whether you have overpaid NI, visit http://www.tips-and-advice.co.uk , Download Zone, year 21, issue 01.

Tip. If one or more of the points apply to you and you are within the time limit for making a claim, review your records to check if you have overpaid NI. HMRC has an online tool that tells you how to make a claim for a refund depending on the type of NI you overpaid (see The next step ).

Tip. If you overpaid NI because of a mistake by your employer, e.g. they charged income which isn’t liable to NI, they should make the refund if you can show them an error was made. However, where for any reason they cannot make the refund, say, because they no longer operate a PAYE scheme, you can write to HMRC and ask it to refund you (see The next step ).

Time limits

Unlike direct taxes and VAT, where generally a four-year time limit applies to claims for refunds, the good news is that for most (but not all) types of NI overpayment there’s no time limit whatsoever. If you think you might have overpaid NI, even if it was 25 years ago, it’s not too late to check and make a claim.

Trap. A six-year time limit applies to claims for NI refunds in the following circumstances:

  • you paid NI in error, for example, your employer continued to deduct it from your salary after you reached state pension age
  • you paid the wrong rate of NI
  • your employer calculated your NI incorrectly.

Tip. HMRC will accept a claim for a refund after the deadline if you have a reasonable excuse for making it late.

For links to HMRC’s online tool and its contact details for NI refunds, visit http://www.tips-and-advice.co.uk , Download Zone, year 21, issue 01.

There are many reasons why you might overpay NI contributions, e.g. you have two or more jobs simultaneously, or are appointed a director part-way through a tax year. As HMRC doesn’t automatically review all NI records you may be owed money without realising it. In most situations there is no time limit for reclaiming NI.

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