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National insurance contributions are payments based on your level of earnings. They help to fund the UK social security system. You pay National Insurance contributions to qualify for certain benefits and the State Pension.
Who pays National Insurance?
To pay National Insurance you need a National Insurance number. You have a National Insurance number to make sure your National Insurance contributions and tax are recorded against your name only. It’s made up of letters and numbers and never changes.
If you don’t have a National Insurance number you can request one.
You pay National Insurance if you’re 16 or over and either:
- an employee earning above £162 a week
- self-employed and making a profit of £6,205 or more a year
How much National Insurance will I pay?
There are different types of National Insurance (known as ‘classes’). The type you pay depends on your employment status, how much you earn, and whether you have any gaps in your National Insurance
Employees pay Class 1 National Insurance contributions of 12% on wages between £702 to £3,863/month, and 2% on wages above this. Contributions are collected by payroll deductions. As well as their own contribution employers also make a National Insurance contribution on behalf of their employees. Both these contributions are paid over to HMRC monthly.
If you’re self-employed you pay Class 2 National Insurance of £2.95/week if you have profits of £6,205 or more a year. If you make profits of £8,424 or more a year you pay Class 4 National Insurance of 9% on profits between £8,424 and £46,350 and then 2% on profits over £46,350. Most self-employed people pay their National Insurance through their Self-Assessment Tax Return.
If you have gaps in your national insurance records you can voluntarily pay Class 3 contributions to make up the shortfall. The main reason for doing this would be to ensure you have 30 qualifying years of contributions so that you receive the full state pension on retirement.
We hope you have found this useful. If you have any queries, please get in touch. We’d love to help.