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HMRC internal manual

National Insurance Manual

Class 1 NICs: reporting NICs in RTI: correction of errors under RTI: closed tax years

Social Security (Contributions) Regulations 2001, Schedule 4, paragraphs 21E (6) and 11ZA

If there’s an inaccuracy in the calculation and or/reporting of NICs for a closed year (after 20 April), the employer must:

  • correct the mistake as soon as possible and
  • complete an Earlier Year Update (EYU) for the relevant tax year

An EYU must contain specific information, for example:

  • HMRC references
  • identity details for the employee
  • earnings and NICs YTD figures from the final FPS for the affected tax year
  • category letters for affected totals
  • value of adjustment to each value affected
  • If the value of primary NICs due is reduced, an indication that the employer has refunded the amount due to the employee

Overpayment of NICs

If, as a result of the adjustment, the employer has made an overpayment of NICs (primary and/or secondary) to HMRC and a repayment is due he can either:

  • set off the overpayment against earnings related contributions he is due to pay to HMRC in the tax period when he amends the return, or
  • claim the amount of overpaid contributions back from HMRC

In the case of a refund of primary Class 1 NICs due to the employee for a closed tax year, before applying one of the 2 options above, the employer must firstly refund the employee those overpaid contributions and then notify HMRC he has done this by indicating “Yes” on the relevant data item on the EYU. If the employer is unable to repay the employee their overpaid primary Class 1 NICs, the 2 options contained above do not apply. Instead, the employer must notify HMRC they have not repaid the employee, by reporting “No” in the relevant data item on the EYU. HMRC will then arrange to refund the employee their overpaid contributions.

Any overpaid amount of NICs reported on a EYU is considered to have been paid to HMRC 17 days after the end of the final tax period in the year to which the EYU applies, where payment is made using an approved method of electronic communications and 14 days after the end of the final tax period in the year covered by the EYU in any other case.

Where NICs are overpaid, repayment interest may be due.

Underpayment of NICs

If, as a result of the adjustment, there’s an underpayment of NICs, then the employer should make payment to HMRC as soon as possible. Where possible, the employer may recover any underpayment in primary NICs due from their employee but there are rules about this. See NIM11534.