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Does a tax repayment include national insurance?

Waht happens about NIC when tax is refunded?

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Clients just received a tax repayment, but asked what happens with the NIC that they have paid on these earnings?

They are a basic rate taxpayer so have received 20% back, but no NIC.The reason he was overtaxed was due to a payroll error where he works. I told him the NIC contribution would just sit on his NIC record and would not be repaid, but this seems unfair for a mistake made by his employer?

I told him I would double check. Could someone help fill in my kowledge gap please?

 

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By Matrix
03rd Dec 2018 11:52

Why do you think the NI is incorrect? If the wrong tax code was used then I can understand that a tax repayment became due but why do you think the NI was also wrong?

If the wrong salary rather than the wrong tax code was submitted by the employer then the submission should have been corrected. If it was the correct salary and the table letter, age etc was correct then I don't see how the NI could be wrong.

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By Marsh1
03rd Dec 2018 12:46

Apologise here's more information:

It relates to the 15/16 tax year. Back then his employer only reimbursed 10p from the 45p/25p mileage claim allowed. He wanted to claim the tax free treatment for the rest so asked his employer to process the claim through payroll. They told him to call HMRC and ask them to alter his tax code to take into consideration his additional mileage claim and this would get reflected in his tax code/paylsip. He never did call them, so nothing happened about it.

Hi spouse then became a client of mine and she mentioned this to me. By this time he had left the employer and as the claim was over £2.5k I told him I could file a tax return and claim it back that way.

I did and he received it, but then he asks what happens about the NIC he paid on these earnings, surely he was due that back as well?

I'm not sure about that? I'm guessing I should have told him to go back to his old employer and ask them to do an EYU for the year for him, but from the sounds of it this wasn't an option. Hence my idea about claiming it on a tax return, but then he comes back with this question about the NIC which I'm a bit stuck on?

Maybe I need to do a letter to HMRC, but I expect there's a lot more people out there with better knowledge about this subject?

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By Matrix
03rd Dec 2018 12:56

I still don't see why a tax repayment would have any bearing on the NI suffered. If the employer had paid 45p a mile would this have changed the NI?

I assume you file tax returns for clients and some pay extra tax but others get tax repayments - do you think this also affects the NI paid? Take a step back and you will be able to answer your client.

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By Marsh1
03rd Dec 2018 14:13

Yes of course, step taken and now is all clear.
Thank you

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By Wanderer
03rd Dec 2018 12:55

On the basis of what you have said your understanding is incorrect and the NIC correct.

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