HMRC Annual Maximum for National Insurance Contributions. When you are employed and self-employed you’ll pay Class 1, Class 2 and Class 4 national insurance. That can add up, especially if you have substantial earnings. HMRC sets out a maximum amount every tax year of national insurance that you need to pay. Here’s how to check if you are overpaying and how you can get a refund.
When you are employed and self-employed you will:
- Have Class 1 National Insurance automatically deducted from your earnings
- Pay Class 2 and Class 4 national insurance calculated when you fill out your self-assessment tax return.
Depending on how much you earn, the amount of national insurance you pay may exceed HMRC maximum amount for the tax year.
A tax year runs from 6 April to 5 April
What is the HMRC Maximum Amount for National Insurance Contributions
The HMRC Maximum Amount is for people who are:
- Employed and self-employed
- Have more than one employment
The Maximum Amount is not a fixed amount and needs to be calculated on a person by person basis, according to how much they have earned.
There are two tests and whether you need to use one or both of them depends on your personal situation.
Maximum Amount Test 1
Who is it for? Anyone who is employed and self-employed or has more than one job
What does it calculate? If you are employed and self-employed it tells you whether you need to pay Class 2 National insurance. If you have more than one job, it will tell you whether you are due a national insurance refund.
Maximum Amount Test 2
Who is it for? Anyone who is employed and self-employed
What does it calculate? Whether any class 4 refund is due because sufficient contribution was made via employment.
How to Calculate the Annual Maximum
HMRC set out a series of fairly complicated calculations you need to work through to determine whether you need to pay Class 2 National Insurance or are due any refunds.
I’ve put together an Annual Maximum Calculator for 2018/2019 for test 1 and test 2. It will help you estimate whether what you need to pay or whether you can claim a refund.
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