National Insurance UK: Everything You Need to Know

National Insurance (NI) is a form of tax that workers and employers pay in the UK. It funds state benefits such as the National Health Service (NHS), pension schemes, and unemployment benefits. Understanding your NI contributions and entitlements is important for your financial future. This article will provide you with all the information you need to know about National Insurance in the UK.

What is National Insurance?

National Insurance is a tax system in the UK that provides funding for state benefits such as healthcare and pensions. Similar to other taxes, National Insurance is deducted from your gross pay (before tax), and the amount you pay depends on your earnings.

Employees pay National Insurance contributions (NICs) as a percentage of their earnings. The amount deducted is based on different classes of contributions, which are determined by your employment status and earnings. Employers also pay NICs for each employee they hire.

Who Pays National Insurance?

All employees who earn above a certain threshold are subject to National Insurance contributions. This includes employees who are self-employed, full-time or part-time employees, and those who earn income from other sources.

You must start paying National Insurance contributions once you reach the age of 16 and continue until you reach the state pension age. You can check your state pension age on the government’s website.

How Much Do You Pay?

Your National Insurance contributions are calculated based on your earnings. The rates and thresholds for NI contributions are updated every tax year. For the tax year 2021/22, the thresholds and rates are as follows:

Rate	Income	Employee’s Contribution	Employer’s Contribution
Class 1	£184 – £967 per week	12%	13.8%
Class 2	Below £6,515 per year	£3.05 per week	N/A
Class 3	Voluntary contributions	£15.40 per week	N/A
Class 4	£9,568 – £50,270 per year	9%	2%

It is worth noting that if you earn less than the lower earnings limit, you will not have to pay any National Insurance contributions. You will still be eligible for some state benefits, however.

How is National Insurance Used?

National Insurance contributions are used to fund state benefits such as:

• The National Health Service (NHS)
• The State Pension
• Jobseeker’s Allowance
• Maternity and Paternity Pay
• Benefits for those with disabilities

These benefits are funded by the National Insurance Fund, which is separate from the general taxation system. The money in the fund is used only for the purposes of paying benefits and administering the National Insurance system.

What are the Different Classes of National Insurance Contributions?

There are several different classes of National Insurance contributions, which are determined by your employment status and earnings. The three main classes are:

Class 1

Class 1 contributions are deducted from the earnings of employees who are over the age of 16 and earn more than a certain threshold. The contributions are divided between the employee and the employer, with the employee’s contributions automatically deducted from their pay. The employer’s contributions are paid separately.

There are different rates for Class 1 contributions, depending on how much you earn. You can find out more about the rates and thresholds on the government’s website.

Class 2

Class 2 contributions apply to self-employed people who earn above a certain threshold. These contributions are a fixed weekly amount and are paid directly to HM Revenue and Customs (HMRC) each year.

Class 3

Class 3 contributions are voluntary contributions for people who don’t qualify for Class 1 or Class 2 contributions but still want to contribute to their National Insurance record. These contributions are usually made by people who have gaps in their NI record or want to increase their entitlement to certain benefits.

What are National Insurance Credits?

National Insurance credits are a way to ensure that you still have a National Insurance record even if you’re not paying National Insurance contributions. You may be eligible for National Insurance credits if:

• You’re currently not working
• You’re claiming certain benefits
• You’re taking care of a child or a sick or disabled person
• You’re on maternity, paternity, or adoption leave

National Insurance credits can help to protect your entitlement to certain state benefits, such as the state pension, even if you don’t meet the minimum contribution requirements.

FAQ

What Happens if I Don’t Pay National Insurance?

If you don’t pay National Insurance contributions when you’re required to, you may not be eligible for certain state benefits. This can include the state pension, Jobseeker’s Allowance, and Maternity Pay. It’s important to keep up with your National Insurance contributions to ensure that you’re entitled to these benefits in the future.

When Do I Stop Paying National Insurance?

You stop paying National Insurance contributions when you reach the state pension age, which is currently 66. You can check your state pension age on the government’s website.

What is an NI Number?

Your National Insurance (NI) number is a unique identifier you receive from the government when you start working in the UK. It’s used to track your National Insurance contributions and entitlements. You should keep your NI number safe and secure, as it’s an important piece of personal information.

How Do I Check My National Insurance Record?

You can check your National Insurance record online through the government’s website. This will show you the contributions you’ve made and any gaps in your record. It’s important to check your record regularly to ensure that you’re entitled to the state benefits you’re entitled to.

What Happens if I Overpay National Insurance?

If you overpay National Insurance contributions, you can claim a refund from HM Revenue and Customs (HMRC). You’ll need to fill out a form to request the refund. It’s important to keep track of your National Insurance contributions to ensure that you’re not overpaying and that you’re entitled to the benefits you’re eligible for.

Can I Opt Out of National Insurance Contributions?

No, you can’t opt out of National Insurance contributions. They’re a mandatory tax in the UK, and you must pay them if you meet the eligibility requirements.

Conclusion

Understanding your National Insurance contributions and entitlements is important for your financial future. This article has provided you with all the information you need to know about National Insurance in the UK. Remember to keep track of your National Insurance record, be aware of the different classes of contributions, and ensure that you’re paying the correct amount to protect your entitlement to state benefits.