Aligning Tax and NICs Time Limits
In the latest round of consultations launched by the government, HMRC are seeking views on proposals to reform time limits in place for the recovery of National Insurance Contributions (NICs) debts by aligning the time limits with those for income tax.
This is not an entirely new proposal the government announced at Autumn Statement 2016 that it would remove NICs from the effects of the Limitation Act, following the Office of Tax Simplification report of March 2016. This was re-confirmed by the government at Tax Update Day on the 19 June 2026. The consultation is seeking views on how to implement these measures.
So what does this mean?
At present, NICs and income tax are subject to different recovery and repayment frameworks. For income tax, behaviour-based time limits apply to the assessment of liability, with recovery not subject to a fixed time limit, which means a debt recovery process as set out in the Taxes Management Act (TMA) can be applied from anywhere between 4 and 20 years. For income tax collected via PAYE, a Regulation 80 (Income Tax (Pay as you Earn) Regulations 2003) determination is used, and it is Regulation 80 of the TMA that sets the time frame at anywhere between 4 and 20 years.
In contrast the Limitation Act 1980 and Limitation (Northern Ireland) Order 1989, enables HMRC a time period of 6 years from the date that the NICs became due to recover the debt. In order for the NICs debt to be recoverable after 6 years, HMRC must take protective action by either making a protective claim through the courts, which is administratively burdensome and costly, or entering into a standstill agreement with the customer, which is effective only in compliant cases.
What are the proposals?
Under the proposals HMRC want to introduce the same flexibility in the legislation associated with NICs to extend this time limit without having to go through the lengthy and often administrative burdensome exercise required to extend the deadline. The intention is to simplify the system, reduce administrative burdens, and create a more transparent and predictable approach for employers and their advisers.
The consultation is therefore seeking views on the following reforms:
- remove NICs from the scope of the Limitation Act 1980 and Limitation (Northern Ireland) Order 1989 – By removing NICs from these legislative provisions would mean the recovery of the debt would not be subject to a 6 year time limit.
- introduce a statutory Notice of NICs Liability – This will be based on the statutory limits in place for taxation as set out in the TMA:
- 4 years, or if the inaccuracy was careless,
- 6 years, and if deliberate
- 20 years, with a 12 year time limit for offshore matters.
- align the time limits for recovery of NICs debts with those for income tax debts – The time limits for the recovery of NICs would be set out in NICs legislation, mirroring those in the TMA.
- align the time limits for refunds/repayments of NICs with those given in the TMA – Align the time limit for repaying NICs paid in error with the time limits given in the TMA. HMRC propose to reduce the repayment period by two years where contributions are paid in error this will reduce to up to 4 years instead of 6 which aligns with the standard time frame given by the TMA, HMRC believe that this is a sufficient period of time and should not disadvantage people.
Thoughts for employers
There may be longer term implications for employers, if HMRC introduce more flexibilities in the alignment of NICs this may lead to loss revenue for employers if overpayment claims are restricted to four years as opposed to six. Equally, with the alignment in place is there a risk that this could lead to increased pursuance of historical debts.
Future plans
Whilst the changes are not expected to affect the amount of NICs paid by employees, therefore there is no direct impact on the application of NI calculations, it remains to be seen whether future plans will revisit the alignment of Tax and NIC calculations by introducing a cumulative approach to National Insurance calculations for all employees resulting in the complete alignment of Tax and NICs.
To have your say here is a link to the consulatation https://www.gov.uk/government/consultations/aligning-the-time-limits-for-recovery-of-national-insurance-contributions-with-income-tax/aligning-the-time-limits-for-recovery-of-nics-with-income-tax