Workers who have overpaid National Insurance would have two years less to get their money back under plans put out to consultation by HM Revenue & Customs, which closed this month without any published estimate of what the change would cost households.
The consultation, opened on 13 July and closed on 12 October, proposes cutting the repayment window from six years to four. It also proposes removing National Insurance contributions from the Limitation Act 1980, replacing the current six-year limitation period on debt recovery with the behaviour-based time limits that apply to income tax.
The document contains no costing of the repayment change, no proposed safeguard for claims that are valid today, and no equality impact assessment. HMRC says the economic impact "will be considered fully following consultation" and that a full equality assessment "is not recommended at this stage". No commencement date has been published. "No final policy decisions have been taken at this stage," the consultation states.
It closed sixteen days before John Healey delivers his first Budget on Wednesday 28 October, in which he has promised to fill a £4.7 billion shortfall in the Defence Investment Plan inherited from Rachel Reeves. Proximity is not proof of motive: consultation timetables are set months in advance, the Treasury has not linked the two, and the recovery reform has been in the department's pipeline since 2016. But the timing does mean the proposal will reach ministers' desks in the same fortnight as a difficult set of spending decisions, and nobody has yet been asked to publish the numbers.
What overpaid National Insurance actually means
National Insurance is charged on earnings, and it is overpaid more often than most people realise. But the common assumptions about how it happens are often wrong, and the difference matters to anyone trying to work out whether they have a claim.
Two jobs do not, by themselves, mean a refund. Each employment is assessed separately, each with its own primary threshold of £242 a week or £12,570 a year, and its own upper earnings limit of £967 a week or £50,270 a year. Earnings from two unrelated employers are not added together and charged as a single income.
That cuts both ways. Where both jobs pay below £242 a week, no employee contributions are deducted from either. Earnings between the lower earnings limit of £129 a week and the primary threshold are nonetheless treated as paid for benefit purposes. Whether the year then counts as a qualifying year for the State Pension depends on the worker's earnings, contribution record and the applicable National Insurance rules. The test is applied week by week, so the timing of low-paid work matters as much as the annual total: a year built from enough weeks at or above the lower limit can qualify, while the same money earned in too few weeks may not. That is a question about the contribution record, which is not the same as a refund.
A genuine overpayment usually involves the annual maximum. Regulations 21 and 100 of the Social Security (Contributions) Regulations 2001 limit the Class 1 contributions an individual can be required to pay at the main rate across multiple employments in a tax year. Where that limit is exceeded, eligible workers may be able to claim a refund of the excess. Employees who expect to exceed it can apply in advance to defer contributions in a second job, which requires £967 or more a week in one employment and £242 or more in the other. Where deferment is granted, the second employer deducts 2 per cent rather than 8 per cent on weekly earnings between those figures. It is not a windfall: because it reduces deductions during the year, HMRC checks afterwards whether enough has been paid and writes to the worker if a balance is owed.
Two errors account for most of the rest. A married woman who elected before 11 May 1977 to pay the reduced rate, now 1.85 per cent, remains entitled to it under a certificate of election, form CA4139, CF383 or CF380A, and a payroll that applies the standard letter to her has deducted too much. The same follows where a payroll ignores a valid deferment certificate, or goes on deducting after the employee reaches State Pension age.
Where an employer deducts National Insurance but fails to account for it to HMRC, that raises a separate compliance issue. It does not automatically mean the employee has overpaid National Insurance or is entitled to a refund.
Working out which of these applies to any individual depends on the employment pattern across the year and the category letters used, which is why HMRC reconciles the position after 5 April rather than during it. What can be said with confidence is that the sums are real, they are easily missed, and nothing on a payslip tells a worker with two jobs that anything is wrong.
Where HMRC identifies an overpayment, it writes to the worker, who then applies through a dedicated refund service; the department checks the claim and confirms the outcome. The deadline for applying is the subject of this consultation.
How the change would land on one worker
The current rule sits in regulation 52 of the Social Security (Contributions) Regulations 2001, which allows repayment of contributions paid in error within six years of the end of the tax year in which they were due.
Take a worker who paid contributions twice on the same band of earnings in 2020-21, through a second job where no deferment was in place. The tax year ended on 5 April 2021. Under the present six-year rule, the claim can be made until 5 April 2027. Under a four-year rule, that deadline would have passed on 5 April 2025, and the same would be true of any claim for 2021-22, which currently has until 5 April 2028.
So the practical effect is not that workers lose a year of entitlement in the abstract. It is that a two-year band of existing claims would fall outside the new limit if it applied without savings. Whether that actually happens depends on the draft legislation and its commencement provisions, which have not been written or published. What can be said with confidence is narrower, and worse for the department: the consultation offers no proposed safeguard for those claims, and the professional body that examined the proposal concluded that one was needed.
That matters because a National Insurance record is not only a bill. It is the record that determines entitlement to the State Pension and to contributory benefits. A contributions error discovered late can affect both the money a worker can recover and the qualifying years on which retirement income depends. The Association of Taxation Technicians put the point directly: decisions on contributions can affect pension entitlement, so employees need enough information to understand any change, to keep practical appeal rights and, where appropriate, to make voluntary contributions to protect a year.
The ATT's written response asked for "transitional protection so that existing repayment rights are not lost", together with a statutory relief mechanism comparable to income tax overpayment relief for appropriate late claims. Neither recommendation appears in the consultation.
The 20-year figure, and the asymmetry that does hold
Some coverage of the proposal has suggested HMRC is simply extending its recovery powers from six years to 20. That is not what the document says, and the distinction matters to anyone testing the government's case.
For an ordinary employer or individual who has underpaid, the proposed limit is four years, shorter than the six years the department currently has under the Limitation Act. Six years applies where the loss of contributions was careless, 20 where it arose from deliberate behaviour, and 12 for offshore matters, mirroring the assessment rules in the Taxes Management Act 1970. Once a new statutory Notice of NICs Liability has been issued, recovery is subject to no further time limit unless the liability is challenged, and a challenge through a section 8 decision suspends enforcement.
So the recovery change is, on its face, a mixed picture. The asymmetry lies elsewhere, and it is one of principle rather than arithmetic. The state's power to recover is graduated by conduct, with four, six, 12 and 20-year tiers, each tied to a defined circumstance, and becomes open-ended once notice is served. The citizen's right to reclaim is a single four-year period, with no equivalent of the behaviour-based tiers and no proposed relief mechanism for a late claim.
That last point needs care. The consultation proposes no NICs counterpart to the overpayment relief available for income tax, which is what the ATT asked for and what the department has not offered. It does not follow that every late claim would fail: the position would depend on the final legislation and on whatever residual remedies survive it, and no draft clause has been published. What is clear is that ministers have been asked to create a safeguard and have not yet done so.
HMRC's own justification for the cut is that four years is "the standard time frame given by the TMA" and "should not disadvantage people". The first half of that sentence is a fact about income tax. The second half is an assertion, and the department has published no analysis to support it.
The savings it does quantify are on its own side of the ledger: protective claims in the county courts and standstill agreements, which HMRC says cost it "an average of 4m p.a." The department has published no estimate of the value of refunds that could become unrecoverable under the proposed four-year limit.
A department collecting harder
The consultation is not an isolated measure, and the pattern gives the repayment change its context.
HMRC restarted Direct Recovery of Debts in September 2025, having announced the move at that year's Spring Statement, and has been extending its use since April 2026. The power, introduced in 2015 and paused during the pandemic, lets the department require banks and building societies to transfer money directly from accounts where a taxpayer owes more than £1,000, has ignored repeated contact and can pay but will not. Individuals receive a face-to-face visit before action, at least £5,000 must remain in their accounts, and there is a 30-day objection window with a further right of appeal to a county court. It is a tightly safeguarded power, used sparingly: 19 times in two years before the pause.
The Times reported this month that HMRC had sent hundreds of letters to wealthy individuals seeking extensive detail on their properties, trusts and companies, rather than the narrower information about income and earnings it has traditionally requested.
Each of these measures can be defended on its own terms. Taken together they shift the balance of administrative power towards the department, and they make the case for a shorter refund deadline harder to sustain. A taxpayer who must be given 30 days to object before money leaves their account might reasonably ask why they would have two years fewer to reclaim money the department took in error.
Whose reform is it?
The recovery reform has a longer history than this government, and that should be said plainly.
Removing National Insurance from the Limitation Act was recommended by the Office of Tax Simplification in March 2016 and announced by Philip Hammond at that year's Autumn Statement. It was re-confirmed by ministers at the government's Tax Update Day on 19 June 2026. Labour inherited the machinery and has chosen to proceed with it.
The repayment cut is a different matter. The consultation presents it as part of the same alignment exercise, but it does not attribute the four-year limit to the 2016 report, and it offers no assessment of who would be affected. The distinction is not academic: a simplification programme inherited from a previous administration can be carried forward or paused. Extending it to shorten a statutory refund right is a decision taken now, by ministers now, and it should be defended by them on its merits rather than sheltered behind a decade-old recommendation.
The government's answer
HMRC's press office said: "These proposals are intended to simplify National Insurance by aligning its recovery and repayment rules with those already used for income tax. No decisions have been taken and we're carefully reviewing responses to the consultation to ensure any decisions made are proportionate and workable."
The department's broader position is that the reform is aimed at employer liabilities, does not change the amount of National Insurance employees pay, and affects employees' contribution records rather than their payment obligations. On the face of the proposal, however, the four-year limit applies to repayment claims under regulation 52, the provision that governs repayment of contributions paid in error, whoever paid them.
Andrew Griffith, the shadow chancellor, said: "Labour are scrambling around for cash ahead of the Budget, and ordinary taxpayers are being made to pay the price. This is another example of a Government that is always looking for ways to take money from the public, but makes no effort to make life easier for the people paying the bills. Labour's plans risk leaving ordinary people out of pocket through no fault of their own. That is fundamentally unfair. They should focus instead on making HMRC more accountable, simplifying and lowering taxes so we can get our economy moving."
Great British PAC reaction
Richard Thomson, National Director of Great British PAC, said:
"HMRC increasingly behaves like a greedy pig with its snout permanently buried in the taxpayer’s pocket. When it wants your money, it demands payment immediately, backed by penalties and interest. But when it has taken too much from you, suddenly the rules change and the clock starts running against you.
Now it wants to cut two years from the time workers have to recover overpaid National Insurance - with no protection proposed for existing claims, no estimate of who will lose out and no impact assessment.
That is not fairness. It is the state moving the goalposts to keep money it was never entitled to take. People and businesses should be encouraged to succeed, not trapped in a tax system designed to wear them down.“
The principle at stake
The question is not whether HMRC should be able to collect what it is owed, nor whether National Insurance and income tax should share a rulebook. It is why the alignment runs in one direction. Four years for the citizen, up to 20 for the state where deliberate behaviour is alleged, and no proposed transitional safeguard for existing claims.
If ministers intend to shorten the window in which a worker can recover money the department took in error, they should say so openly, publish what it is worth and to whom, and protect the claims that are valid on the day any change takes effect. None of that has been done. A consultation that asserts people will not be disadvantaged, without producing the analysis that would show it, is not scrutiny of a policy. It is a request that the public take it on trust.