Due to the non-cumulative way in which Class 1 National Insurance Contributions (NICs) are calculated, it could be that an individual pays more than the annual maximum. If this is the case, they may be entitled to a refund and must apply.
There is an annual amount of Class 1 NICs payable each tax year. There is a complicated way of calculating the ‘annual maxima’, outlined in the Social Security (Contributions) Regulations 2001, Regulation 21 and Northern Ireland equivalent. Essentially, if an earner is employed in more than one employment in a tax year, the maximum is:
- The total amount of earnings subject to NICs;
- Calculated at the relevant percentages (8% and 2% on earnings over the UEL)
If the amount of Class 1 NICs paid is above this calculation, it may be that a refund is due and HMRC will send a letter confirming how to make this claim. HMRC have updated their guidance ‘Apply for a refund of Class 1 National Insurance contributions’ which explains:
- If the letter from HMRC has a claim reference number, applications can be made online or by post using form CA4361 which will be sent;
- If the letter does not have a claim reference number, the application can only be made by post; or
- If no letter is received but the earner believes a refund may be due, use the ‘Check how to claim a National Insurance refund’ online tool
For Bookkeepers
The important point to note is that online claims can only be made if the letter includes a claim reference number. Otherwise, applications must be made by post using form CA4361.
Individuals who are due a refund should receive a letter when this is detected by HMRC’s systems. If queried by a client, ICB recommends passing on HMRC’s National Insurance enquires contact details which includes that many ways to contact them, including a telephone number (0300 200 3500).