HMRC wrongly refund voluntary Class 2 National Insurance payments

Posted on 26th June 2024 by Streets National Insurance


Image to represent HMRC wrongly refund voluntary Class 2 National Insurance payments

By Megan-Rose Mason, Tax Assistant


This incorrect refunding may have significant effect on many individuals in the future when the time comes to receive their state pension and other contributory benefits.

The Problem

Each year, Class 2 National Insurance is collected via self assessment returns and payments transferred through self assessment to each individual’s National Insurance record by HMRC. However, all Class 2 contributions need to be paid by 31 January for the contributions to be accepted by HMRC systems.

It has been reported there was a technical problem in HMRC’s automated process for the transfer of Class 2 for the 2022/23 tax year. This has caused a delay in the contributions information being transferred from Self Assessment to National Insurance teams within government departments.

This has resulted in refunds being incorrectly made to taxpayers as HMRC systems cannot deal with the supposed ‘late payment’ caused by the issue. Therefore, even though individuals have paid their tax and Class 2 national insurance by 31 January 2024, they have been told that their payment was late and cannot be accepted and many therefore have received a refund of the Class 2 contributions made.

Those affected

This problem will have affected those who are self-employed with their profits totalling less than £6,725 for the 2022/23 tax year. Those with profits below this amount will have paid voluntary Class 2 National Insurance contributions, any individuals with profits above this amount will automatically be required to pay the £163.80 in Class 2 contributions and should not be affected by this issue.

Paying the £163.80 in voluntary contributions means an individual should not miss any “qualifying years” when it comes to receiving state pension in the event the taxpayer’s self-employment income is less than £6,725.

Many taxpayers have reported receiving a refund of their Class 2 contribution for the tax year 2022/23. This issue has been raised with HMRC and we are currently “awaiting a resolution”.

Correcting the position 

On the assumption that individuals who have paid voluntary Class 2 contributions, still want to make this payment and ensure that 2022/2023 is a qualifying year for them, they will need to take further action.

It is essential to ensure that the HMRC NI Contributions office (0300 200 3500) is contacted to obtain a payment reference and to make a special payment to them directly. Repaying the amount to the self assessment account will not be possible and will result in the amount being refunded again. 

HMRC has advised that “they are currently looking into the issue”.

At this stage, it is important for taxpayers who are making voluntary Class 2 contributions to check that they have not received a refund of £163.80 (or any amount similar to this), from HMRC.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


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