HMRC wrongly refunding some voluntary Class 2 NIC payments

HMRC wrongly refunding some voluntary Class 2 NIC payments

May 10, 2024

A delay by HMRC in processing self assessment tax returns for self employed taxpayers has resulted in the refund of some Class 2 national insurance contribution (NIC) payments by mistake

The Association of Taxation Technicians (ATT) has warned that some taxpayers have received refunds for NICs payments, which they had paid to credit the 2022/23 tax year as part of their annual self assessment tax bill.

This is a significant problem as refunds could have implications for future state pension and other contributory benefits entitlement.

The problem has affected those with profits under £6,725 who paid Class 2 voluntarily so that the year would ‘count’ for state pension purposes.

‘A number of members reported concerns to us about unexpected refunds of Class 2 voluntary contributions. The issue has been raised with HMRC on the Agent Forum (thread SA-44827) and is awaiting a resolution,’ warned ATT.

Although Class 2 NICs have been abolished from 6 April 2024 for future tax years, they are still payable for the 2022/23 tax year.

Class 2 NICs are collected via self assessment and the payments then need to be transferred by HMRC to the individual’s National Insurance record. This is done automatically each year by HMRC.

For voluntary Class 2 payments to be accepted via self assessment, they must be paid by 31 January.

However, this year there was a technical problem with the automated process and HMRC delayed the transfer of the NICs payments.

This resulted in automatic refunds to taxpayers as the HMRC computer system could not deal with the ‘late payment’ caused by HMRC itself.

ATT explained the problem: ‘It appears that this year, the process which moves the payment from the self-assessment computers to the NI records was run late.

‘The result is that some taxpayers who had paid their tax (including voluntary Class 2) by 31 January 2024 have been told that their Class 2 element was paid late and cannot be accepted.

‘They have been issued with a revised income summary and tax calculation (SA302) rejecting the Class 2 payment and refunding the £163.80 paid.’

Correcting the position

Assuming the individual still wants to pay their Class 2 and obtain a ‘credit’ for 2022/23 towards their state pension, further action is now needed.

It is necessary to phone the NI Contributions office on 0300 200 3500 to obtain a payment reference and then make a special payment direct to them. It is not possible to simply pay the amount back into the self-assessment account.

HMRC has told ATT that ‘they are currently looking into the issue’.

‘In the meantime, members may wish to check that any clients who have tried to pay Class 2 voluntarily have not had payments incorrectly returned.’