HMRC error means self-employed workers could lose out on National Insurance related benefits
The Low Incomes Tax Reform Group (LITRG) is warning that an HMRC error could mean that some low-income, self-employed workers lose out on their entitlement to National Insurance-related benefits like the state pension unless they take action.
The issue centres around the payment of voluntary Class 2 National Insurance contributions (NICs) that can be made by self-employed taxpayers with profits under £6,7251.
These voluntary contributions are usually paid by taxpayers as part of their self assessment return and must reach HMRC by the 31 January following the end of the tax year.
HMRC then automatically transfer the NICs to the taxpayer’s National Insurance record to be counted towards their entitlement to benefits such as the state pension and other employment, maternity and bereavement benefits.2
However, it appears this year that HMRC did not initiate the transfer until after the 31 January deadline. In some cases, this resulted in the voluntary contributions of up to £163.803 being rejected and refunded automatically to affected taxpayers.4
In the absence of any action, this could mean that taxpayers miss out on a qualifying year of National Insurance contributions.
LITRG is calling on HMRC to identify and contact those affected to make them aware of the issue and arrange for the voluntary Class 2 NICs to be paid and properly reflected on their National Insurance record.
In the meantime, LITRG is recommending that taxpayers who have received a refund of their voluntary Class 2 NICs but who want to retain their qualifying year for National Insurance purposes for 2022/23 phone HMRC’s National Insurance helpline on 0300 200 3500 to make arrangements to pay back the refunded amount. It is not possible to pay the amount directly to your self-assessment account.
Antonia Stokes, LITRG Technical Officer, said:
“This appears to be an unfortunate error by HMRC that may impact certain low-income self-employed workers who have tried to keep their entitlement to National Insurance related benefits up to date in the 2022/23 tax year.
“The issue is unique to the year in question, and our advice to those who might be affected is to first check to see whether they have received a refund from HMRC. If they have, or if the taxpayer is unsure, they should contact the National Insurance contributions helpline to determine their position and, if necessary, make a special payment directly to them.
“We would also like to see HMRC acknowledge the error and proactively offer help to those taxpayers who have been affected, in line with HMRC’s own charter commitments. However, until they do so, there are practical steps that taxpayers can take to maintain their entitlement to National Insurance related benefits.”
Notes for editors
- Self employed taxpayers with profits below the Small Profits Threshold (£6,725 in 2022/23 and 2023/24) are not liable to class 2 NICs, but are able to pay voluntarily if they wish.
- See: What National Insurance is for (GOV.UK website).
- In 2022/23 voluntary class 2 National Insurance contributions were payable at a rate of £3.15 per week of self-employment. The maximum amount rejected and refunded as a result of the error could therefore be 52 x £3.15 = £163.80.
- Any refund arising as a result of the error is likely to be notified to the taxpayer by a revised SA302 tax calculation. The accompanying message from HMRC may indicate that the voluntary contributions were received late and therefore cannot be accepted through self assessment – even if the taxpayer did pay before the 31 January 2024 deadline.
