National Insurance

National Insurance Contributions (NIC) is an additional tax deducted at source as part of PAYE. Self-employed people pay different rates.

If you want the minimum pension when you retire, you'll also need to ensure you pay in the right amounts over your working life.

When Do You Pay NI Contributions?

You pay NI when you have income over a certain amount, and this is called the earnings threshold. These limits change at least once a year when the Chancellor announces the budget.

Your Benefits

By paying National Insurance, an individual builds up a contributions record determining that person's entitlement to social security benefits including NHS treatment and the level of state pension available on retirement.

Different Rates by Employment Type

The type of contribution and rate you pay depends on your earnings and employment status. You pay different amounts if you are employed under PAYE (Pay As You Earn), self-employed or a director of a company.

When You Reach State Pension Age

You do not pay National Insurance once you reach statutory retirement age which varies by the year you were born. By November 2018 both men and women have a state pension age of 65. This increases to 66 in 2020, 67 in 2028 and 68 in 2037. You can check your pension entitlements using the government's state pension calculator.

Social Security Benefits

The benefits that you are entitled to depends on how much you contribute to NI over your working life and could affect the following social security items:

  • Contribution-based Jobseeker's Allowance (Class 1 NICs only).
  • Incapacity Benefit (if you can't work for long periods due to illness or injury).
  • Contribution-based Employment and Support Allowance (ESA).
  • State Pension.
  • Additional State Pension (Class 1 NICs only).
  • Widowed Parents' Allowance.
  • Bereavement Allowance and Bereavement Payment.

Basic National Insurance Rates

For the current 2017/18 tax year a person will pay the following:

  • If you're employed by a company and pay tax under PAYE, you will pay 12% of your salary from £155 a week (Primary Threshold) to £866 per week (the Upper Earnings Limit).
  • Over the Upper Earnings Limit, you pay 2% tax as National Insurance contributions.
  • Both of the above scenarios get classed as Class 1 NICs.

The upper earnings limit has been increased dramatically higher than inflation in recent years by various governments in an attempt to attract additional taxes from higher earners.

  • If you are self-employed, you pay NI as class 2 NICs at a flat rate of £2.80 per week.
  • You pay a 9% flat rate on annual taxable profits between £8,060 and £43,000 as class 4 NICs.
  • You also pay 2% on profits over this figure.

National Insurance - Rates and Allowances

All data shown is on a per week basis.

When Employees Pay NI - Primary Threshold

Your earnings when you start to pay the basic rate of National Insurance commence at the Primary Threshold up to the Upper Earnings Limit. The figure in brackets is the rate of tax payable between these two figures.

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
£149 (12%) £153 (12%) £155 (12%) £155 (12%) £157 (12%) £162 (12%)

The Primary Threshold has increased by 8.7% in six years, while inflation increased by 8.4%.

The Upper Earnings Limit

The rate of National Insurance payable changes once you reach the Upper Earnings Limit. The figure in brackets is the percentage you pay on all earnings above the limit.

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
£797 (12%) £805 (12%) £815 (12%) £827 (12%) £866 (12%) £892 (12%)

The Upper Earnings Limit increased by 11.9% over this period.

Find the most up to date information on the government website.