Repayments of NIC arising from two or more jobs

How an overpayment of NIC can arise

There is an annual maximum of contributions applying to any individual for a contribution year (tax year). This applies where the earner either:

• has two employments (and is therefore paying Class 1 national insurance contributions (NIC) twice)
• is both employed and self-employed (and is therefore paying Class 1, 2 and 4 NIC)

There is a proforma that must be followed to calculate whether a repayment is due. See below.

The start of a new tax year might require some consideration as to NIC paid in the past and a look ahead to the future, depending on a taxpayer’s current circumstances. For example, an application might need to be made to defer Class 1 contributions or an existing deferral renewed.

Collection and deferment

Where an individual can demonstrate that they are paying more than the annual maximum of NIC (see below), it may be possible to apply for deferment.

It is only possible to make an application for deferment of Class 1 NIC. Prior to 2015/16, it was also possible to apply to defer Classes 2 and 4 NIC. This is because, with the collection of Class 2 NIC being within the self-assessment tax return from 2015/16 onwards, Class 2 NIC is payable at a time when the Class 4 and Class 1 NIC liabilities for the year are known). This means that the annual maximum calculation is done via the self-assessment tax return.

The deferment application means that the NIC liabilities are not in fact paid in full, in effect giving in-year relief for the annual maximum.

Class 1 deferment

Applications via form CA72A? are permitted for deferment of Class 1 primary contributions, for example, where the taxpayer has more than one employment. HMRC determines for which of the employments deferment will be granted. In those employment(s) where Class 1 deferment is granted, the employee continues to pay Class 1 contributions at 2% in excess of the upper earnings threshold. The responsibility to make up any shortfall rests with the employee.

Once deferment has been established, a renewal form is normally sent direct to the claimant by HMRC in January or February before the next tax year. This form must be completed, signed and sent to HMRC, who may require past payslips to be sent to it to substantiate the application.

An NIC assessment will be raised if a deferment is given which was not in fact due. This could happen, for instance, if the individual left the employment part-way through the year and did not pay the maximum Class 1 contributions. HMRC will raise the appropriate assessment and collect the underpayment directly from the taxpayer.

Class 2

From 2015/16 onwards, the usual payment date for Class 2 NIC is 31 January after the end of the tax year (as Class 2 contributions are not included in the calculation of the income tax payments on account). Consequently, from 2015/16 onwards, HMRC does not accept applications for deferment of Class 2 NIC.

HMRC states that it will use other information that it holds, combined with the details on the self assessment tax return to determine the Class 2 NIC due. Details of the amount due will be shown in the self assessment calculation.

Class 4

From 2015/16 onwards, HMRC does not accept applications for deferment of Class 4 NIC.

As explained in ‘Class 2’ above, the fact that there does not appear to be a published procedure as to how the automatic reconciliation of the NIC paid actually works in practice may be problematic in cases where there is potential for an overpayment of NIC owing to the payment on account being based on the previous year’s profits.

Calculation of annual maximum

There are two tests available to perform this calculation. ‘Test 1’ compares Classes 1 and 2 and allows an individual to reclaim any excess of Class 2 (and then, if appropriate, any of the Class 1). ‘Test 2’ may allow a refund of Class 4 contributions. There is no time limit for requesting a repayment.

Our team of expert can evaluate NIC position and advice you the best course of action to claim NIC back.