Overpaid National Insurance

briskly_2

I'm still confused about the NI rules. When I called the Revenue last year they told me that most employers only send them the collected NI at the end of the year, so that it is up the the employer whether they make refunds for overpayments.

Taking the annual NI allowance as £7,200 (may be a bit more or less, I can't remember the exact figure), as I see it, this should mean that, in the extreme example that someone earned £7,200 in one month and nothing the rest of the year, they would be clobbered for paying (£7,200 - £600) x 12% NI in that month = £780, whereas if they had earned a steady £600 a year they would have paid no NI at all. This should mean that the employer could refund all £780 of the withheld NI at the end of the tax year. Is this correct? If not, it would appear to be grossly unfair to the low and erratically paid. Why can't the revenue make this crystal clear and how come it doesn't get more publicity?-

little_woman

Since 5 April 2012 all employers are required to make payments either monthly or quarterly to HMRC and are liable to pay interest on any payments made late. So information you were given about employers payments is now out of date.

NIC is worked out on a monthly basis for all employees. Company directors have the option to have their NIC assessed on a Monthly or Annual (even if paid monthly) basis.

Next year RTI (real time information) is being phased in so each month when your employer does the pay run, it will include sending the information (not just the tax & nic to HMRC. In theory they are supposed to make corrections in the following month, but too many of the software companies have admitted it will not be possible to do this. Some software companies have decided to discountinue Payroll software. Many employers do not have the knowledge or skills make payroll correction unless they are really simple or straight forward.

You need to find a way to ensure your employer has the correct information each month to pay you propertly in time or you will always have this problems.

briskly_2

Thanks for this. I do give the employer all the information for each month and they send it to the payroll - which is run by an external company - but payroll then make the mistakes and refuse to compensate. Sometimes they pay someone else my wages by mistake! We are talking about a University here....

Surely this NI situation is very unfair? It is not really an annual allowance at all. Why can the tax allowance be spread over the year but not NI?

Nicola_Ed

briskly wrote: »

Thanks for this. I do give the employer all the information for each month and they send it to the payroll - which is run by an external company - but payroll then make the mistakes and refuse to compensate. Sometimes they pay someone else my wages by mistake! We are talking about a University here....

Surely this NI situation is very unfair? It is not really an annual allowance at all. Why can the tax allowance be spread over the year but not NI?

You have answered your own question. It is not an annual allowance and never has been for employees. I think your error is to think of it having the logic (!) that income tax has. I often used to say to clients - no its not fair - but that's the rules!

briskly_2

But if you self-assess rather than participate in PAYE, can you then spread the NI allowance over the year? If so, surely this is outrageous?

EvieSaver

Hi Briskly,

I also have the same problem, and I am also paid by a university. I find it very annoying.

briskly_2

Hi EvieSaver,

Sorry to hear you have had the same problem. Have you ever managed to get a refund from them?

Savvy_Sue

little_woman wrote: »

Since 5 April 2012 all employers are required to make payments either monthly or quarterly to HMRC and are liable to pay interest on any payments made late. So information you were given about employers payments is now out of date.

But historically (and until RTI is fully phased in), the employer only reports actual NI and PAYE deductions to HMRC on an annual basis, which does mean that HMRC would have been none the wiser about what was deducted when. Which you would think would make refunds possible, if not simple.

little_woman wrote: »

Next year RTI (real time information) is being phased in so each month when your employer does the pay run, it will include sending the information (not just the tax & nic to HMRC. In theory they are supposed to make corrections in the following month, but too many of the software companies have admitted it will not be possible to do this. Some software companies have decided to discountinue Payroll software. Many employers do not have the knowledge or skills make payroll correction unless they are really simple or straight forward.

And even companies running an outsourced payroll may struggle ...

Nicola_Ed

briskly wrote: »

But if you self-assess rather than participate in PAYE, can you then spread the NI allowance over the year? If so, surely this is outrageous?

The concept of self assessment means that taxpayers are technically responsible for calculating their own tax and NIC liability but in practice your employer deducts what he believes is the correct amount for you.

To reiterate - unlesss you are a director you do not have an annual NI allowance as an employee (you may be confusing the annual allowance which self employed tax payers have)

briskly_2

Thanks. I should have asked that if I opted to become self-employed and invoiced the University for the work, instead of being on PAYE, could I then effectively obtain an annual NIC allowance? If so, it would help a lot of people in my position to know this.