Is this correct- National Insurance

[TheRebel]

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.

How can that be right?

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.

Because national insurance isn’t done on a cumulative basis like income tax is, it is done on a payment period basis. There is no such thing as a national insurance refund.

Out of interest, why did your employer do that? Did they discuss it with you first?

Sorry, that is unfortunately correct. You can't get a national insurance refund.

My previous employer was less then organised and often paid me two months in one go (I had a zero hours contract), which cost me a lot in NI over payments.

NI isn’t the same as income tax.

www.gov.uk/claim-national-insurance-refund

You can claim a refund in certain circumstances. My Dad did when he'd overpaid - can't remember exact details but some monumental cock up around his pension.

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!

NI Is not cumulative.
You are stuffed sadly.

Only the VERY high paid get refunds if they pay excess Class 1

or people can get a refund if there has been an overpayment in the year they hit retirement age

Re low paid workers, you can have 2 x£7.5k jobs and pay no NI.

I think the NI system is flawed because of situations like this and I’m surprised HMRC haven’t ever addressed the problem. The cumulative tax system works much better and is fairer.

coffee
The NI rules were very deliberately never changed
as the ministers deliberately stopped the low paid from getting full pensions with low NI contributions

the new pension will change that
but may bankrupt the count

It is a bad system. If you earn a medium or large amount, you benefit from being paid in one go because the rate goes down to 2% at higher incomes.

If they addressed the problem and made it cumulative, it would replicate PAYE exactly and then people would wake up to the fact it is a complete political scam.

It should be abolished and the factored into the income tax rates and bands but it is left as a deliberate complication to confuse people about how much tax they are paying.

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.

Recommendations have been made to change to a cumulative basis for NI. May be a few years yet though before it happens.

www.gov.uk/government/publications/closer-alignment-of-income-tax-and-national-insurance-contributions