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.
DOWNLOAD THE ANNUAL MAXIMUM 2018/2019 CALCULATOR
Maximum Amount Test 1
Test 1 calculates the maximum amount of National Insurance you need to pay, then compares this to what you have paid.
This determines whether you are due a refund for overpaying class 1 national insurance and whether or not you need to pay Class 2 national insurance if you are self-employed.
Maximum Amount Test 2
Test 2 is for Class 4 National Insurance. If you are employed and self-employed the Class 1 deductions your employer makes may be sufficient to reach the annual maximum.
This test determines your annual maximum and whether you are due a Class 4 refund.
How to Reclaim Overpaid National Insurance
If you have paid too much Class 4 National Insurance then you can apply online to get a refund.
For the 2015/16 tax year onwards HMRC will calculate your annual maximum amount to check you have paid the right amount of Class 2 and Class 4 national insurance. They will notify you if there is an under or overpayment.
But if you know you have paid too much Class 4 National Insurance then you can apply online to get a refund.
Deferring National Insurance Payments
If you know in advance that you are likely to overpay on your national insurance. You can apply to HMRC to make what is known as a “deferment“.
A successful application will mean your employer will deduct less Class 1 National Insurance to save you the hassle of waiting for a refund after the tax year.
If you would like to apply for a deferment then you can fill out this online form.
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