HMRC incorrectly refunds Class 2 NIC payments

If you paid voluntary Class 2 NIC payments for the 2022/23 tax year, you’ll want to read this update.

According to the Association of Taxation Technicians, HMRC has accidentally refunded some people who paid voluntary Class 2 National Insurance Contributions (NICs) to make the year ‘count’ for state pension purposes. The problem affects people with profits under £6,725 who then made the voluntary payments.

For Class 2 NIC payments to count via Self-assessment, you must pay them by 31st January. Unfortunately, HMRC’s automated process had a technical problem. This resulted in a delay of the transfer of NIC payments. Because HMRC’s systems couldn’t deal with the supposedly ‘late’ payment, it automatically refunded some taxpayers.

My Class 2 NICs have been refunded – what do I do?

If HMRC has refunded your Class 2 NICs, they’ll send you a revised tax calculation that rejects your voluntary payment of £163.80. This will be refunded.

If you still want the money to count towards your state pension, you need to get in touch with HMRC. You can do this by ringing the National Insurance Contributions Office on 0300 200 3500. They’ll give you a payment reference. You can then use this to make the payment direct to them. You cannot do this via your Self-assessment account.

HMRC launches online voluntary NI payment service

Coincidentally, HMRC has just launched a new online voluntary NI payment service. This went live on 29th April 2024 (although we reported on it back in October 2023).

The new service is called Check your State Pension forecast. When you log in, you can see any gaps in your NIC record. The service will also tell you how much you could increase your state pension by making voluntary NICs.

The service also simplifies making voluntary NIC payments. You can pay securely using the online portal. You’ll then get confirmation of your payment and that your National Insurance record will be updated.

Big gaps in your NI record? Act soon!

If you have big gaps in your National Insurance record, it may be wise to ‘buy back’ years so they count towards your state pension.

Currently, you have until 5th April 2025 to buy back any year going back to 2006. However, from 6th April 2026, you’ll only be able to buy back any of the six preceding financial years.

Although it costs £824 to ‘buy’ a missed year, you’ll recoup that cost within three years of retiring. For example, if you bought back six years at a cost of £824, it would cost you £4,944. While that may sound a lot, it would add an extra £1,650 to your annual state pension at current rates.

You can also buy back years if you are already drawing your pension. However, as far as we are aware, you’ll still need to contact the Pension Service rather than using the new online tool.

Need advice on NICs?

If you are an existing THP client and would like advice on whether you should top up your state pension with voluntary NICs, get in touch. Your account manager would be delighted to help you.