National Insurance refund

Grumpy_Old_Duffer

I took early retirement half-way through tax year 2012/13.

For the year 2013/14 my taxable income was below the tax threshold, therefore I paid no income tax. In this tax year I received a Bonus from my ex-employer and not even this put me over the tax threshold for this year, however my ex-employer did deduct Income Tax and National Insurance from the Bonus payment, which was based on performances in 2012/13. I have since received a Tax rebate from the Inland Revenue for the full amount of Income Tax that my ex-employer had deducted from the Bonus payment.

I have made a claim for the refund of the National Insurance that was deducted from the Bonus payment, as it seems logical that if the Income Tax was fully refunded from the Bonus payment, then so should the National Insurance contributions.

The HMRC have stated that as the National Insurance was deducted from a Bonus payment, then the contributions were deducted correctly.

1. Is this correct?
2. What difference should a 'Bonus' payment make?
3. Why is the Income Tax refundable, but the National Insurance is not?

Caz3121

Grumpy_Old_Duffer wrote: »

[*]Why is the Income Tax refundable, but the National Insurance is not?

Income tax gives you an annual allowance and you pay tax on everything you earn over that allowance
NI does not work on an annual but a weekly calculation. If you earn over that threshold in any particular week then NI is due.
Refunds can be made in few circumstances eg paying too much

link here http://www.hmrc.gov.uk/ni/refunds-complaints/claimback.htm

chrisbur

Grumpy_Old_Duffer wrote: »

1. Is this correct?
2. What difference should a 'Bonus' payment make?
3. Why is the Income Tax refundable, but the National Insurance is not?

1 Yes
2 Being a bonus makes no difference at all whatever the payment had been for it would have had NI deducted and this would not be refunded. NI is worked out on your earnings for your pay period so if paid monthly and any month you earn enough to pay NI then it is due and no refund is made whatever happens for the rest of the year. (There are slightly different rules if you have more than one job)
3 The tax was refundable as tax is based on earnings for the tax year, anything paid during the year is an "estimate" of what is due not until the tax year end can the exact figure be calculated and this may result in tax being refunded or possibly owed.

agrinnall

In these circumstances the only way you would get a NI refund is if your early retirement was only slightly early and you had reached state pension age before the bonus was paid, at which point deduction of employees NI should stop.