How to correct an employee’s overpaid National Insurance contributions

In this article, we discuss;

How to correct an employee’s overpaid National Insurance contributions
Estelle website

Estelle Hardwick

Share this article

In this article:

Picture of About Estelle Hardwick

About Estelle Hardwick

Estelle is the Director of AMR, overseeing the Tonbridge, Tunbridge Wells and Chatham branches. She makes sure that AMR provides exceptional support to each and every client.

Read More

Running a company payroll isn’t always straightforward. Common problems include incorrect or late payslips, missed pension payments, under or over-payment of salary, wrong tax calculations and issues with National Insurance (NI) payments. In this blog, we look at what you should do if you find you have inadvertently overpaid an employee’s NI contributions.

National insurance rates are subject to change depending on government decisions and employers must keep up to date with these changes. There are four main categories:

  • Class 1 – paid by employers and employees
  • Class 2 – paid by the self-employed
  • Class 3 – voluntary contribution
  • Class 4 – Paid by the self-employed and have profits over a certain amount

Payslip with £1 coins and £10 note

Here, we are looking at Class 1 contributions which are payable by employed taxpayers under state pension age, and are made up of a combination of employer payments and employee salary deductions via PAYE. The amounts deducted and paid depend on how much of the employee’s earnings fall within a particular band. For the year 2023-2024 this is:

  • Earnings of £242 to £967 per week – 12%
  • Earnings of over £967 per week – a further 2% on top

Errors can occur for various reasons. For example, an employee might have another job elsewhere of which you were unaware, and NI calculations should have been carried out based on both jobs. Alternatively, your employee may have reached state pension age and no longer need to pay NI.

If you’re an employer and you find that you have mistakenly overpaid an employee’s NI contributions, you have two options. You can either offset the overpayment against earnings-related contributions which you are due to pay to HMRC in the tax period when you amend your return, or you can claim back the amount which was overpaid from HMRC.

However, if the error was not discovered until after that tax year has ended, then you must refund the overpaid contributions to the employee and then inform HMRC that this has been done by ticking ‘yes’ on the relevant box of the employee’s next Full Payment Submission (FPS). The FPS is sent to HMRC every time an employee is paid and it contains all current payment information about each employee.

There may be circumstances in which you’re not able to repay the amount to your employee, in which case you must tell HMRC that the repayment has not taken place by ticking ‘no’ on the FPS. The overpaid contribution will then be refunded directly by HMRC. It’s worth noting that where an over-payment has taken place, depending on the amount of time before repayment, interest may become due.

However careful you are, mistakes can happen, especially if you’re not experienced at bookkeeping. Using a professional to help run your payroll can be surprisingly cost-effective and could free up more time for running your business. At AMR Bookkeeping Solutions, we manage all aspects of processing payroll for businesses including any liaison with HMRC. Why not give us a call on 01892 559480 or contact us through our website and find out how our friendly and efficient team can help you avoid NI overpayments and other payroll errors.

More articles you might like

Why choose AMR Bookkeeping Solutions?


We combine the highest level of professionalism with a friendly, clear approach for all of our clients.


Our approach is tailored to the needs of each individual client, and we build personal relationships to make sure that our clients can have complete trust in what we do.

AAT Qualified

All of our services are provided by our team of Association of Accounting Technicians (AAT) qualified bookkeepers, highly experienced bookkeeping experts and certified accountants.

CPD Trained

Each member of the team undergoes Continuing Professional Development (CPD) which keeps them right up to date with changing tax legislation.

Accredited Experts

All our bookkeepers are accredited in leading accountancy software Sage, Xero and QuickBooks.

AAT logo
Xero Gold Partner
Sage logo
Intuit Quickbooks ProAdvisor Gold
Freeagent logo

Get in touch for a free, no obligation consultation

Find out how AMR Bookkeeping Solutions can provide the right support for your business, send us your details and one of our experts will get in touch with you without delay.

Alternatively, you are welcome to contact us by phone on 01892 559480

You can also pop into our offices in Tonbridge.