Learn about different types of National Insurance contributions (NICs), how to find out how much you’ve paid and when you can claim National Insurance credits.
What are National Insurance contributions?
National Insurance is the UK tax system into which employees and employers pay National Insurance contributions (NICs). National Insurance pays for state benefits, which provide those who qualify with an income if they’re sick, injured or unemployed. National Insurance contributions (NICs) fund the state pension, which can be claimed when people reach statutory retirement age.
The class of National Insurance contribution (NIC) that you pay is determined by your employment status, how much you earn and whether there are any gaps in your National Insurance record (see section 4).
For 2019/20, you’ll pay National Insurance if you’re more than 16 years old and either:
an employee earning more than £166 a week or
self-employed and generating a profit of £6,365 or more a year.
What types of National Insurance contributions (NICs) are there?
Class 1 NICs Employees below state pension age earning more than £166* a week pay these (*2019/20 tax year). Employers deduct them automatically from earnings before paying their staff.
Class 1A or 1B NICs These are payable by employers for expenses or benefits given to their employees.
Class 2 NICs Self-employed people who earn more than £6,365* a year must pay these, but you can choose to pay voluntary contributions if you earn less (*2018/19 tax year).
Class 3 NICs These are voluntary contributions you can pay to cover or avoid gaps in your National Insurance record.
Class 4 NICs Self-employed people earning profits of more than £8,632* a year pay these (*2018/19 tax year).
What are the current National Insurance contribution (NIC) rates?
12% if they earn £166-£962 a week (or £719-£4,167 a month)
2% over £962 a week (or £4,167 a month).
Payments are lower for married women or widows with a valid ‘certificate of election’ or for those who defer National Insurance because they have more than one job.
Employers also pay towards employees’ National Insurance. However, for the 2019/20 tax year, if an employee (with NI category letter A) earns £118-£166 a week (or £512-£719 a month), their employer does not have to pay anything. However, they must pay 13.8% on earnings of £166.01 or more a week (£719.01 a month).
Employers pay Class 1A and 1B National Insurance contributions (NICs) on expenses and benefits they give to their employees. The rate for the 2019/20 tax year is 13.8%.
If you’re self-employed and earn profits of £6,365 or more a year, you must pay Class 2 National Insurance contributions (NICs) of £3 a week.
If your profits are £8,632 or more a year, you will pay Class 4 National Insurance contributions (NICs) of:
9% on profits between £8,632-£50,000
2% on profits over £50,000
Sole traders pay Class 2 and Class 4 National Insurance contributions (NICs).
Company directors are classed as employees and pay National Insurance contributions (NICs) on salary and bonuses over £8,632. Contributions are worked out from annual earnings rather than earnings in each pay period.
What are National Insurance credits?
If you’re not receiving a wage because you’re ill or you’re unemployed and therefore cannot pay National Insurance contributions (NICs) in either case, you may be able to get National Insurance credits.
National Insurance credits can fill gaps in your National Insurance contributions record and therefore enable you to claim certain benefits if you’re just short of qualification requirements.
If you’re eligible, there are two types of National Insurance credits:
Class 1 – which count towards your state pension and can enable you to claim other benefits (eg contribution-based Jobseeker’s Allowance) and
Class 3 – which only count towards your state pension.