Individuals who are both employed and self-employed may be due a refund for overpaid National Insurance (NI). This is not automatic and individuals should therefore consider whether a claim is appropriate, which could go back without time limit.
NI is charged at different rates depending on an individual’s employment status and total earnings. For the 2015/16 tax year, the rates are as follows:
Income Level
|
Employed (Class 1)
|
Self-employed (Class 4)
|
| £0 - £8,060 |
0% |
0% |
| £8,060 - £42,385 |
12% (10.6% if contracted out) |
9% |
| £42,385 + |
2% |
2% |
During a tax year an individual may be both employed and self-employed. This could be, for example, a sole trader or partner in a partnership securing an employment contact one day a week with an external employer, or an employee who has a sole trade business that he or she may run in their spare time.
In order to see if you qualify for a refund, you should ask yourselves the following key questions:
- Were you employed and self-employed during a tax year?
- Did your total earnings exceed £42,385?
- Are you under state pension age and pay NI?
- Have you previously applied for a refund of overpaid NI?
Under normal tax rules, the maximum number of years that HMRC will adjust a taxpayer’s calculation in their favour is 4 tax years. However, there is a specific provision in legislation allowing refunds for Class 4 NI to be backdated indefinitely, meaning that potentially substantial refunds may be due.
If you think that the above may apply to you and that you may be due a refund of overpaid contributions, please get in touch with our specialist advisers who will be able to consider a potential claim further.
