The Labour government is considering reducing the timeframe for workers to reclaim overpaid National Insurance contributions (NICs) from six years to four, a move proposed by HM Revenue & Customs (HMRC) in a recent consultation document. Currently, taxpayers have up to six years from the end of the tax year in which the NICs were due to request refunds. Under the proposed change, that window would be shortened to four years, aligning the period with the deadline for reclaiming income tax under the Taxes Management Act (TMA).

HMRC also plans to extend its authority to recover unpaid NICs from six years to up to 20 years, significantly broadening the time it can pursue outstanding liabilities. These proposed adjustments come ahead of Chancellor John Healey’s first Budget, expected to include measures aimed at addressing a £4.7 billion shortfall in defence spending.

The consultation highlights HMRC’s intention to standardize the treatment of NICs with income tax, stating that four years should provide a sufficient opportunity for taxpayers to claim refunds in cases of overpayment. The agency emphasized that the majority of taxpayers who meet their obligations would not experience adverse effects from the change. However, the consultation did not provide an estimate of potential financial impacts on households.

Currently, a claim for a National Insurance overpayment for the 2020-21 tax year can be made until April 5, 2027, under the existing six-year rule. If the four-year limit is enacted, claims would only be accepted for overpayments from the 2022-23 tax year onward from this autumn.

The proposals have drawn criticism from opposition figures. Shadow Chancellor Andrew Griffith accused the government of placing additional burdens on ordinary taxpayers amid efforts to raise revenue. He argued that the changes risk disadvantaging individuals through no fault of their own and called for reforms aimed at improving HMRC’s accountability and simplifying the tax system.

These developments follow recent HMRC initiatives to bolster tax enforcement, including plans to deduct money directly from bank accounts of individuals owing more than £1,000 in tax. Additionally, HMRC has reportedly sent letters to high-net-worth individuals seeking detailed information about their property holdings, trusts, and companies.

HMRC has yet to finalize decisions on the proposed changes, with a spokesman confirming that no determinations have been made. The government is expected to announce further details in the upcoming Budget.