Are You Paying Too Much National Insurance?
Most people who earn £162 or more per week (or £6,205 or more a year if you’re self-employed) pay National Insurance. If you simply have one PAYE job, National Insurance is often fairly simple. However, there are some aspects that can complicate things and lead to you paying too much.
If you have more than one job or if you’re both employed and self-employed, you’ll want to make sure you’re not overpaying on your National Insurance contributions. So how do you know if you’re paying too much?
There is a prescribed annual maximum normal contribution, which is 53 weeks at the standard primary Class 1 contribution rate between the earnings threshold and the upper earnings limit.
This means that the maximum amount for 2018/19 is £4,642.80, and there is a further 2% to pay on earnings above the upper limit (currently over £892 per week or £3,863 per month).
To avoid going over this amount, you can apply for deferment of contributions, which is best to do before the start of the tax year.
Deferring Class 1 National Insurance
You might be able to defer Class 1 National Insurance if you’re an employee with more than one job. This can apply if you either pay Class 1 National Insurance with more than one employer, earn £892 per week or more with one employer or earn £1,053 or more per week from two jobs.
By deferring, you will usually pay a reduced rate of 2% on earnings between £162 and £892 for one of your jobs.
Class 2 National Insurance
If you’re self-employed, you might expect your earnings to be below the threshold for Class 2 National Insurance. This is £6,205 for 2018/19; above this, you are expected to pay £2.95 per week.
You can apply for an exception if your profits are going to be below this amount. However, some people choose to voluntarily pay Class 2 National Insurance contributions to maintain the benefits that they receive from payments.
Class 4 National Insurance
It’s no longer possible to defer Class 4 National Insurance, which is paid at 9% of self-employed profits between £8,424 and £46,350 per year, and 2% above that.
However, you can apply for a refund from previous tax years if you think that you have paid too much.
How To Defer Your National Insurance
If you want to defer your national insurance contributions, you can send form CA72A to HMRC before the 14th of February if you’re employed or 31st January if you’re self-employed. You can do this online using Government Gateway or by sending a paper form.
At the end of the tax year, HMRC will check to see if you have paid enough National Insurance and let you know if you have any more due.
To pay it, you are asked to send your payslip and a cheque to HMRC or if you don’t have a payslip, your contact details with your National Insurance Number and the amount that you’re paying.
Final Thoughts
If you still feel unsure if you are overpaying for your National Insurance, or simply feel like you could do with a hand when it comes to deferments, then get in touch with Three Kings Accounting on 01753 840 188.