Don't pay too much national insurance

For those who have several jobs or self-employment income in addition to employment income, it is important not to pay too much national insurance. Certax can advise you.

If you have income from more than one job, or if you have self employment income as well as being employed, you should take care to ensure that you do not pay more in national insurance contributions than you need to.

The prescribed annual maximum normal contribution for an individual is 53 weeks at the standard primary (employee) Class 1 contribution rate between the earnings threshold and the upper earnings limit. For 2015–16 this works out to be £4,197.60. There is also an additional 2% payable on earnings in excess of the upper earnings limit.

If you think there is a chance of your exceeding this limit, you can apply for deferment of contributions on the 'surplus' employments and/or self employment. The Deferment Group recommends that application should be made before the start of the tax year, but will accept applications up to 14 February during the tax year.

Class 1 contributions

The Deferment Group will tell you for which employments they have allowed deferment of contributions and will send to the relevant employer(s) a certificate telling them not to deduct primary Class 1 contributions from you during the tax year and asking them to refund any contributions they may already have deducted from your wages/salary during the year.

Class 2 contributions

If you expect your earnings from self employment to be less than the small profits threshold limit (£5,965 for 2015–16), you may apply for exception from paying Class 2 contributions. However you may, if you wish, continue to pay Class 2 contributions voluntarily to keep up your entitlement to the benefits they provide (Incapacity Benefit, Retirement Pension, Widow’s Benefit and Maternity Allowance).

Your Class 2 contributions may be deferred if you can show that you are otherwise likely to pay above the annual maximum normal contribution (£4,197.60 as set out above) in Class 1 and Class 2 contributions. Class 2 NICs will be abolished in 2016 and Class 4 NICs will be changed to give the payer rights to pensions and benefits.

Class 4 contributions

Your Class 4 contributions may be deferred if your normal national insurance contributions (Classes 1, 2, and 4) are likely to exceed the maximum for Classes 2 and 4 normal contributions on their own). The Government will consult on the detail and timing of these reforms at a later stage.

After the year end

After the end of the tax year, the Deferment Group will work out your overall contribution position for the year and collect any balance of contributions that may remain payable.

Contribution refunds

If you do not apply for deferment in time, it is still possible to claim a refund of overpaid national insurance contributions. The time limit for claiming is broadly six years after the end of the tax year in which the payment was made.

Please contact us if you would like further information or assistance in this area.

For more advice about not paying too much national insurance if you have self-employment income, contact Certax.