HMRC is encouraging employers and company directors to carefully review how National Insurance contributions (NICs) are calculated, to ensure accuracy and prevent costly compliance errors. The guidance is specifically targeted at directors on PAYE, with a focus on ensuring the correct amount of NICs is paid by the end of the tax year.
This issue has been brought into focus because of two changes in NIC rates in 2024, which span across two different tax years. The rate reductions on 6 January 2024 and 6 April 2024 may have led to calculation errors if not properly accounted for in payroll systems. In year NIC changes, like those in 2022–23, add complexity and raise concerns over calculation accuracy.
Next Steps
Employers should review payroll submissions from the 2022–23 tax year onwards to ensure that all National Insurance contributions (NICs) for directors have been correctly calculated using the annual earnings period method to identify any shortfalls.
- If an underpayment is identified, it should be self-corrected through PAYE where possible; and
- If self-correction isn’t feasible, HMRC requires a voluntary disclosure to be made.
When submitting a disclosure, quote reference ‘DNIC2025’ in all communications with HMRC.
