(NIC) National Insurance Debt - HMRC Tax Advice

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(NIC) National Insurance Debt

National Insurance (NI) is a tax that offers employees insurance against illness and unemployment and is the second largest source of income tax to middle bracket incomes in the UK.

In the lead up to a child's 16th birthday, they are provided with a National Insurance (NI) number. This six digit number allows for the monitoring and management of all future National Insurance contributions.

People who make National Insurance contributions are allocated to a four - class contribution system.

  • Class 1 National Insurance Contributions
    Class 1 National Insurance contributions are paid by employers and employees. The employee contribution is calculated by deducting an amount from the gross wages paid by the employer, with no further action required by the employee.
  • Class 2 National Insurance Contributions
    Class 2 National Insurance contributions are made by the self employed on a weekly basis, at fixed amounts. These National Insurance contributions are calculated on a weekly amount, but usually paid on a monthly or quarterly basis.
  • Class 3 National Insurance Contributions
    Class 3 National Insurance contributions are voluntary and made by people wishing to make up for a gap in their record of contributions, which may occur through not working or low earnings.
  • Class 4 National Insurance Contributions
    Class 4 National Insurance contributions are paid by the-self employed as an amount from their profits.

National Insurance Debt Recovery

The Inland Revenue operates a National Insurance debt department to recover any unpaid National Insurance contributions.

The Debt Collection Unit works to collect, pursue and allocate any arrears which may arise through lack of payment towards Class 2 National Insurance contributions.

Any outstanding National Insurance debt is usually pursued through telephone communication and payment plans can be arranged to ensure that any future contributions are made on time and at the required amount.

Civil Recovery Section

If payment is unable to be secured, through the debt recovery unit, the case may be passed on to the Civil Recovery Section (CRS).

The Civil Recovery Section will take legal proceedings in the Civil (County and High) Courts if necessary.

Important Facts Relating to National Insurance Debt

According to the OFT Debt Collection Guidance of 2003 (updated 2006), there are some rules that the HMRC must follow when chasing National Insurance debt.

  • HMRC cannot force you to repay more than you can comfortably afford to pay each month.
  • If you choose to make a reduced payment, HMRC's National Insurance department cannot refuse it.
  • HMRC cannot add any additional charges for non payment of debts, other than the actual costs for collection activity.


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