Incorrect refunds of Voluntary Class 2 National Insurance payments

Incorrect refunds of Voluntary Class 2 National Insurance payments

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

This has meant that some taxpayers have received refunds for NIC payments, which they had correctly paid to credit the 2022/23 tax year as part of their annual self assessment tax bill.

This could lead to a significant problem, as these refunds could have implications for future state pension and other contributory benefits entitlement.

The problem will have affected those with profits under £6,725 who paid Class 2 voluntarily so that the year would ‘count’ for state pension purposes, so far there has not been a resolution issued by HMRC.

Although Class 2 NICs were 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, it seems that this year there was a technical problem with the automated process and HMRC delayed the transfer of the NICs payments, which resulted in automatic refunds to taxpayers as the HMRC computer system could not deal with the ‘late payment’ caused by HMRC itself.

How to correct this HMRC error.

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.

The best way is for the individual to telephone the NI Contributions office on 0300 200 3500 to obtain a payment reference and then make a payment direct to them. It is not possible to simply pay the amount back into the self-assessment account.