Prior Year corrections to National Insurance contributions

We have recently had to process overpayments for the 2022/2023 tax year that has meant that employee and employer National Insurance refunds are due. We have submitted amended FPS files for March 2023 with the correct YTD NI thresholds and employee and employer contributions for the affected employees, because HMRC advise employees "Contact your employer and ask them to correct their Full Payment Submission. They’ll usually be able to refund you using their payroll software system. If they cannot, write to HM Revenue and Customs (HMRC) after the end of the tax year you’re claiming for. You’ll need to tell them: your National Insurance number why you overpaid which tax year or years you overpaid in" and Employers "Once you know why you’ve overpaid, you can claim your repayment from HMRC" So does this mean we can't refund the NI through the payroll system for a prior tax year for the employee and employer or just the employer? We have recently moved to a new payroll system that allows us to enter balance adjustments so we can enter a refund to allow the employee to receive the funds rather than write to HMRC and request payment and the same for employer contributions so should we utilise that or just send an amended FPS file with the corrected thresholds but with the original contributions and then write to HMRC asking them to issue a refund for employee and employer and not make the refunds through the payroll system> Many thanks

Hi Julie Searles,

As per Paragraph 1.18.2 from CWG2 - Further guide to PAYE and National Insurance contributions:  Errors in FPS submitted in the previous tax year, if you discover that you’ve not submitted an FPS or you’ve reported incorrect year to date figures, you should submit an additional FPS with corrected year to date figures as at 5 April for the previous tax year.

You can submit to corrections to the original FPS information for up to 6 years after you filed your original FPS or EPS.

This applies where you have overdeducted National Insurance.  When the additional FPS is processed, the employer record will be credited with the amount due to be repaid.  The employer can self-serve by reducing their next payment to us, and use the withheld amount to repay the employee.  Alternatively, the employer can ask us to refund the payment to them and use this to refund the employee.  The latter option will however take longer.

Thank you.

Hi, Thanks for your reply, so we are correct in our sending the amended FPS files with the correct year to date figures and that we can refund through the payroll system the previously overpaid contributions. How would you expect to see the refund on the employees FPS submission? i.e. a late overpayment for 2021/2022 is processed in tax year 2023/2024 and the employees NI Able pay/UEL is reduced by £1000 and they are due a refund of £120.00 We have submitted the FPS correction for 2021/2022 and want to refund the employee £120 through the September 2023 payroll, the employees NIable earnings are £3255.44 and the FPS is reporting a UEL figure of £2497.44 on which £299.69 Employee NI is due, if we enter the £120 refund of NI for 2021/2022 that will make the contributions reported for September £179.69 which will be a perceived underpayment of contributions. Will you reconcile the fact that the employee overpaid £120 based upon the revised FPS figures for 2021/2022 and underpaid £120 for 2023/2024? This will also be the same scenario for the employer contributions Many thanks

Hi Julie Searles,

Yes, you are correct in sending amended FPS with the correct year to date totals for your employees.
The figures will update at HMRC end as long as the FPS have been done correctly.
The reduction in liabilities reported will generate a credit on your PAYE account where you have already made payment for prior liabilities.
The FPS amendments should be reported for the tax year you wish to correct i.e. you would not send an FPS amendment for 2023/24 for an error made in 2021/22 tax year.
The FPS correction for 2021/22 will create a credit for that year, which you can either offset against future employer liabilities or request to have refunded to your business.
If there were no errors made in this tax year, your current payroll should not be affected and should continue as normal.
If you are unsure on how to send the FPS amendments, you should contact your payroll provider for further advice.
If you wish for further assistance from HMRC, please contact the Employer Helpline on 0300 200 3200.

Thank you.