One of the big dangers of overpaying National Insurance is if you are both employed and self employed. For example, you may have full-time employment but run a small self employed business on the side.
If that is the case then there is danger in overpaying national insurance!
Profits From Self-Employed Business Are Small (less than £5,075)
If your profits are less than £5,075 (for 2010/11) per year you can apply for a certificate of small earnings exception and not pay Class 2 National Insurance contributions. To apply for exemption you need to fill in the Form CF10.
But what if you pay too much national insurance contributions than you need to?
The prescribed annual maximum normal contribution for an individual is 53 weeks at the standard primary (employee) Class 1 contribution rate between the earnings threshold and the upper earnings limit. For 2010/11 this works out to be £4,279.22. There is also an additional 1% payable on earnings in excess of the upper earnings limit.
If you think there is a chance of your exceeding this limit, you can apply for deferment of contributions on the 'surplus' employments and/or self employment.
If you think that you will exceed this limit then a claim may be made to defer payment of Class 2 or Class 4 NI using the Form CA72B.
Class 2 Contributions
Your class 2 contributions may be deferred if you can show that you are otherwise likely to pay above the annual maximum normal contribution (£4,279.22 as set out above) in class 1 and class 2 contributions.
Class 4 contributions
Your Class 4 contributions may be deferred if your normal national insurance contributions (Classes 1, 2, and 4) are likely to exceed the maximum for Classes 2 and 4 normal contributions on their own (£3,180.00 for 2010/11).
Contribution refunds
If you do not apply for deferment in time, it is still possible to claim a refund of overpaid national insurance contributions. The time limit for claiming is broadly six years after the end of the tax year in which the payment was made.
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