I’ve been on maternity leave since last April and I’m about to go back to work, so my employer paid my holidays in a lump sum before I return.
I paid £100 in National Insurance, but my total income for the year will be about £7k so I thought I’d be due an NI refund, but when I called them they said it doesn’t matter what my annual earnings are it’s only based on my monthly pay, so if my employer had paid my holidays over 2 pay periods I wouldn’t have had to pay any NI and would have been £100 better off.
I wouldn't call HMRC right now if you can avoid it as it's tax return time and they are swamped! Tax year runs until April so the year hasn't finished yet for you. So take a look after April at what you've paid overall.
It just seems to me like a flawed system that penalises low paid and seasonal workers, luckily for me this is the only time I’ll be affected as my pay is the same every month normally but I’m just shocked that it isn’t worked out over the tax year.
My work contract states that once maternity leave finishes then you must take all of your holidays before returning to work, so they just paid me the lot, if I’d known I would have asked them to spread it out over 2 months!
Sadly, national insurance is not cumulative as others have stated. The biggest problem is that it isn't payable on earning3over £45000! National insurance is different to income tax as your pension is a legal right and not a benefit. However, governments using the fund for other purposes is leading to a projected shortfall in the near future.