July 6th, 2016

Removal of ability to defer Class 4 National Insurance Contributions

Up until the year ended 5 April 2015, if you were both employed and self-employed you had the option of applying to defer your Class 4 NIC contributions whilst HMRC calculated whether any payment was owed.  On your self-assessment return you were allowed to pay over contributions at the rate of 2% rather than 9% on those profits liable to Class 4 National Insurance.

Things have changed and HMRC have not made it crystal clear how exactly the changes will work.  HMRC guidance says that “no deferment is available for 2015/16 and HMRC will use the information they already hold and the information in your return to let you know any Class 2 and Class 4 NIC needs to be paid.”

So, the position appears to be (according to accountancy forums and the ICAEW forum) is that you have to declare the full Class 4 liability on your tax return and then it is left to HMRC (in its own time) to calculate what refund is due.  There is much speculation as to how long this may take and as to how long you may be out of pocket.  HMRC do provide a link on their website to claim any NIC overpaid which I assume is probably the quickest way to ensure that the caclulation is indeed looked at.

All in all, my opinion is that best advice is to get your tax return completed and submitted early so a claim for a refund of overpaid NIC can be made in the hope that it’s all sorted by 31 January 2017 when all tax and NI for 2015/16 is due.  A reduction of payments on account could be considered whilst the refund is being processed.

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National Insurance Contributions


Alison obtained a First class degree in Accountancy and Management at UCLAN University. She then went on to qualify as a certified accountant in 2006 and became a founder member in 2011.

Alison trained at a practice in Liverpool and, within her 10 years there, she developed as an accounts manager and obtained a varied portfolio of clients which has provided her with a range of experience in accounts, audit, VAT and taxation.
Alison specialises in giving sound jargon-free advice to a range of small and medium sized businesses.

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