Overpaid National Insurance? How to Claim Back & Cut Payroll Costs

Concerned you’ve paid too much National Insurance? You’re not alone.

Your National Insurance (NI) contributions depend on your employment status and how much you earn. However, you could end up overpaying, either monthly or annually, for various reasons.

And, sometimes, these overpayments go unnoticed, so it’s important to monitor your contributions and understand which class you’re paying into.

This guide breaks down all you need to know about overpaying NI – from how it’s calculated and common reasons for overpaying, to how to claim your refund.

What Is National Insurance Used For?

Firstly, let’s take a step back and remind ourselves of why National Insurance is needed.

National Insurance contributions are an integral cog in the UK’s welfare system, funding state benefits such as:

State pensions
Unemployment benefits
The NHS
Maternity allowances
Jobseeker’s allowance
Bereavement benefits

In short, your NI contributions help fund certain benefits that support the welfare system, which is a social safety net for millions of people.

How is National Insurance Calculated?

The amount of National Insurance you pay all depends on your employment status (e.g. if you’re employed, self-employed or both) and how much you earn.

If You’re Employed

Both you and your employer pay National Insurance on your earnings. It’s calculated on your weekly earnings, so, for example:

Up to £242/week: 0% (you and your employer)
£242.01 to £967/week: 8% (you), 15% (your employer)
Over £967/week: 2% (you, on the portion above £967), 15% (employer continues at 15%)

If You’re Self-Employed

Self-employed workers will submit a tax return each year, which calculates the amount of National Insurance that is owed. This is called a Self-Assessment return:

Under £12,570/year: 0%
£12,570 to £50,270/year: 6%
Over £50,270/year: 2% (on the amount above this threshold)

Note: As of April 2024, Class 2 National Insurance contributions are no longer mandatory for most self-employed people, although voluntary payments may still be made to protect certain benefits.

Here’s a breakdown of the National Insurance classes:

Class 1: Applicable if you’re earning more than £242 a week from one job, and you’re under State Pension age. This is the most common type of NI contribution.
Class 2: Primarily for self-employed individuals who can choose to pay Class 2 voluntarily to protect their benefits.
Class 3: These are also voluntary contributions that self-employed individuals or people who are not working can make.
Class 4: Payable by self-employed workers earning more than £12,570 a year.

The first step in recognising you’re overpaying NI is understanding which class of NI you’re contributing to, and whether or not you will be able to claim a refund.

You can use HMRC’s National Insurance Calculator for a personal estimate of how much NI you pay.

What’s an ‘Annual Maximum’ of National Insurance?

This refers to the maximum limit you can pay in NI contributions in a single tax year.

Every individual will have an annual maximum calculated based on their annual salary or monthly earnings, and it protects you from overpaying more than you need to.

If you have multiple jobs or a combination of employed and self-employed income, you may end up paying more than necessary, especially if NI is deducted separately by each employer.

However, with the annual maximum in place, that means if you have overpaid, you’ll receive a repayment to account for it.

You can also notify HMRC proactively if you’re working multiple jobs so they can adjust your contributions accordingly.

Common Reasons You Could Be Overpaying National Insurance

If you believe you’re overpaying NI, it may be due to one of these reasons:

Errors in Categorisation: HMRC could have included you in an NI bracket in error, meaning you’re paying more than you should be.
Changes in Income: If you’ve recently had a pay rise or changed jobs, it’s likely your NI contributions will also need to change.
Errors From Employers: Your employer may have entered your NI calculation incorrectly.
Working Multiple Jobs: NI might be deducted separately by each employer without accounting for your overall annual threshold.
State Pension Age: You no longer have to pay NI after reaching this age, but contributions may still be deducted if records aren’t updated.

Understanding which of these areas applies to you is key to being able to claim your refund.

What to Do if You Think You’ve Paid Too Much National Insurance

Here are four routes you can take to recover overpaid National Insurance:

Contact Your Employer: They might be able to provide you with a refund directly using their payroll system.
Claim for a Refund: You can check how to claim a National Insurance refund from the Gov website, as well as find guidance.
Contact HMRC Directly: You can also make a claim directly to HMRC. This would be the route for self-employed workers to use, or if an error has been made by an employer that they cannot resolve.
Seeking Professional Advice: Although in many cases, NI refunds can be handled independently, some more complex cases might benefit from professional advice. At Haggards Crowther, we offer support for both businesses and individuals, and can handle the whole process for you.

Whatever way you choose to claim your refund, you’ll need to make sure all of your documentation is in order beforehand. This includes:

National insurance number
P60s
Payslips
Correspondence with your employer regarding overpayment (if applicable)
Bank details (for refund)

What if HMRC Rejects My Claim?

HMRC can sometimes reject your claim for a National Insurance repayment.

Once you’ve submitted your claim and received HMRC’s response, if you disagree with the decision, you have the right to appeal.

You would need to request a formal review from HMRC and, if unresolved, escalate this to the independent tax tribunal.

Changes to National Insurance Contributions in 2025

There have also been some notable changes to NI contributions, for employers in particular, in 2025.

It’s good to familiarise yourself with these changes to see how they could affect your contributions or repayments:

Increase NI Contributions: Increased from 13.8% to 15% on employee earnings.
Earlier Contributions: Employers also now start paying at £5,000/year instead of £9,100, meaning more part-time workers may trigger contributions.

However, for employees, the Primary 8% on £242–£967/week and Upper (2%) remain unchanged, so these changes mainly only affect employers.

Employer Advice on Paying Too Much NI

As an employer, you may also overpay NI, especially if employee classifications or contributions are incorrect.

If you believe this is the case, contact HMRC directly. You can discuss your NI contributions, the classes each employee is part of and ways to reduce your NI contributions if these have been incorrectly calculated.

If there’s been an error, HRMC will fix it and refund your business with the overpayment amount.

Reducing Payroll Costs for Employers

It’s also important to recognise potential financial challenges the 2025 rates have created for employers, especially SMEs.

Generally, NI contributions for employers have increased significantly, with more part-time or flexible workers now also triggering contributions.

To find support for this, make sure your business is claiming the Employment Allowance. This has increased to £10,500/year from 1st April 2025 and, if your business is eligible, it directly reduces your National Insurance bill.

You could also look to reduce payroll costs. Of course, this would need to be handled delicately, but here are some pointers:

Optimise Staffing Levels: Look to train people to do more – this would mean not as many staff are needed. Also, hiring freelancers or contractors for projects would mean that no NI contributions or benefits are required.
Leverage Technology: With the increase of technologies such as AI, incorporate tech into your day-to-day to automate processes and get more value from your workforce.
Review Pay Structures: Make sure your pay bands are in line with industry standards, and look to introduce performance-based bonuses instead of flat salary increases.
Use Apprenticeships for Junior Roles: This can reduce salary outlay. There are also government incentives and lower NI contributions for apprentices under 25.
Avoid Overtime: Overtime can be expensive, especially when accounting for additional NI, so try to avoid it where possible.

We’re Here to Help You!

In short, if you suspect you’ve been paying too much NI, the first port of call is to get in touch with your employer, or directly with HMRC.

After providing the relevant documentation and your claim has been accepted, you will then receive a repayment from HMRC for the amount you’ve overpaid.

Make it a habit to check your NI deductions regularly – either monthly or annually – especially if your employment status or salary changes.

Need some professional advice? That’s where we can help. We offer guidance on National Insurance, employee benefits & tax-efficient compensation strategies for both individuals and businesses.

Get in touch with a member of our expert team today.

Lyndsey Reed

With over 20 years’ experience in the industry, Lyndsey is our dedicated CIPP trained Payroll Manager. Her passion for accuracy and compliance brings a forensic understanding of payroll best practices to the firm. Throughout her career, Lyndsey has worked with various organisations ranging from small businesses to large organisations.

These have provided her with a broad perspective and extensive expertise working with different types of payroll management, like diverse employee populations, including full, part-time and contract workers. Perhaps her most valuable skill is her ability to navigate complex payroll systems and stay up to speed with the ever-changing HMRC regulations.

She ensures everything aligns to strict compliance and legal requirements, and her meticulous attention to detail combined with strong analytical skills make her adept at accurately calculating employee wages, deductions and tax withholdings.