National Insurance is basically a simple tax, but one that is often overpaid by hospital consultants.

The chances are that if you are an NHS consultant, you will be paying most of the required National Insurance via your NHS salary (Class 1 NIC). If you have a private practice you must complete the appropriate deferment forms, otherwise you will be asked to pay additional Class 2 and Class 4 contributions.

The Class 4 contributions are assessed via your self-assessment tax return. Most consultants can do little to escape the 1% Class 4 charge on earnings, but things are normally amiss if they are paying the main 8% charge.

Class 2 National Insurance is often wrongly paid, but not picked up by the accountant as the demands go straight to the taxpayer. The chances are that if you are an NHS consultant with a private practice and are getting regular small NIC bills (or an annual bill for around £100) you have not completed the appropriate forms and should do so as soon as possible.

Take a little care with NIC and you will not have a problem. Fail to deal with some simple paperwork and you may be paying hundreds (if not thousands) of pounds when you do not have to.

John O’Leary is head of medical taxation at Sheen Stickland LLP. Contact him on joleary@sheen-stickland.co.uk or 01420 83700.