National Insurance (NI)

National Insurance (NI) is a contribution paid to HMRC by employees, their employers, and the self-employed. The purpose of National Insurance is to qualify people for certain provided benefits such as the State Pension.

Who pays National Insurance?

You’ll pay the tax if you’re 16 or over and are either:

1. In employment and are earning above £242 a week
2. Self-employed and making a profit of £6,725+  a year

Employers also pay National Insurance for their employees who earn over £242 per week.

Once you reach the state pension age, you don’t need to pay NI at all.

The National Insurance classes

Different taxpayers pay different kinds of National Insurance, called ‘classes.’

NI classWho paysHow is it paidHow much is itClass 1Employees earning more than £242 per week who are under State Pension age a yearYour employer deducts it through PAYE12% (or 2% if you earn over £242 a week)Class 1A or 1BEmployers for employees earning over £242 per weekYour employer pays it on top of your Class 114.53%Class 2Self-employed people earning over £6,725 a yearThrough a Self Assessment tax returnFlat £3.45 per weekClass 3Voluntary contributions – you can pay them to fill gaps in your NI recordThrough a Direct Debit£17.45 per weekClass 4Self-employed people earning over £12,570 a yearThrough a Self Assessment tax return9% (or 2% if you earn over £50,270)

How to pay your contributions

If you’re employed then National Insurance will be automatically deducted from your monthly pay. However, if you’re self-employed, then you need to pay these contributions yourself. This is usually done through your Self Assessment tax return.

Whether you’re employed or self-employed, it’s important to make sure that you have the right tax code, so that you’re not underpaying or overpaying NI and Income Tax.

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