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National insurance contributions (NIC)

National insurance is a tax on your earnings that goes into the National Insurance Fund which pays for various benefits. This guide covers some basic information about NIC.

1. What is national insurance ?

National insurance is a tax on your earnings that goes into the National Insurance Fund which pays for various benefits. This guide covers some basic information about NIC.

Applies to: England, Wales, Scotland and Northern Ireland.

Age Rules: You pay national insurance contributions between the ages of 16 and state pension age on earnings but not pensions. After state pension age, even if you have a job you do not need to pay any more contributions. 

Which Agency: National Insurance Contributions Office of HM Revenue and Customs (HMRC)

 

Reviewed: August 2017

2. What is a national insurance number?

Your national Insurance (NI) number is unique to you throughout your life but it is not a form of identity. It is made up of 2 letters, 6 numbers and a final letter.

Everyone who wants to work in the UK must have a national insurance number. To obtain a national insurance number, you must be 16 or over and resident in Great Britain or Northern Ireland. 

You can start work without one but you must then apply immediately. The law requires you to apply for NI number if you do not already have one and you are working or are intending to work.

 

Reviewed: August 2017

3. How do I get a national insurance number?

If you are looking for work, starting work or setting up as a self-employed person, you will need a national insurance number. If you have the right to work in the UK, you will need to telephone Jobcentre Plus on 0345 600 0643 to arrange to get one. Lines are open 8.00 am to 6.00 pm Monday to Friday and are normally less busy before 9.00 am. They may require you to attend an 'Evidence of identity' interview.

There is some useful information on how to apply for a national insurance number  on the Gov.UK website (link opens in a new window)

Once your application is successful, you will receive a letter confirming your NI number. Take good care of this as it is your reminder of your NI number and you will need to use it when you contact HM Revenue and Customs (HMRC) or the Department for Work and Pensions (DWP). As soon as you have your NI number, you should tell your employer.

 

Reviewed: August 2017

4. What are national insurance contributions (NIC)?

National insurance helps to pay for some state benefits including retirement pensions. Your national insurance contributions (NIC) earn you the right to receive certain benefits.

Whether you are working for an employer or are self employed and working for yourself or for a partnership will affect the type of contribution you pay.

Employees

Employees pay Class 1 national insurance contributions of 12% on earnings above the £166 per week  primary threshold.  You pay an extra 2% on earnings above the upper earnings limit of £962 pw. 

If your income falls below the primary threshold, you will not need to pay any contributions.  If your income is between £118 (the lower earnings limit) and £166 per week then you will get national insurance credits.

Employers are also expected to pay Class 1 NICs (known as secondary contributions) at 13.8% on the earnings of each employee who earns more than the primary threshold. This contributes, among other things, towards the employee's entitlement to statutory payments.

Self employed

If you are self employed, you pay two types of NICs.

A weekly flat rate (Class 2) is payable. Most people now pay Class 2 contributions as part of their self-assessment tax bill.  Information for those who don't pay through self-assessment can be found on the HM Revenue and Customs website (link opens in a new window).
The second type of NICs (Class 4) are based on the level of your profits.
You can also pay voluntary NIC (Class 3).

If you are self employed and you think your profits will be less than a set limit - £6,365 - you won't need to pay Class 2 NIC.  However, you will have the option to pay Class 2 voluntarily to protect your entitlement to the state pension and other benefits. 

 

Updated: April 2019

5. How do I pay national insurance contributions?

Class 1 (employees): Paid through your earnings. It is taken out of your gross wages by your employer who just pays you the net amount.

Class 2 (self-employed only): Since April 2015, Class 2 has been paid via self-assessment, so you will pay Class 2 at the same time as Class 4.  It will be due as part of the payment due on 31 January following the end of the tax year.  For example, Class 2 for 2018/19 will be due on 31 January 2020.  If your income is below the small profits threshold, no Class 2 will be due, though you can choose to pay voluntary contributions.  If you might have to rely on Class 2 contributions for entitlement to certain benefits, for example Maternity Allowance, you may need to pay Class 2 NIC before the self-assessment deadline.  You should contact HMRC to find out how to do this.

Class 3 (voluntary): Paid normally by quarterly bill or monthly by Direct Debit or by making an annual lump sum payment.

Class 4 (self employed only on profits): Paid with the income tax on your profits through self assessment.

 

Reviewed: August 2017

6. What benefits do my national insurance contributions (NIC) pay for?

For some UK benefits, you need to have paid or been credited national insurance contributions (NIC). These are called contributory benefits. There are other benefits where provided the rules for claiming apply to you, it does not matter whether or not you have paid any NI contributions. 

Benefits which depend on NIC include:


Benefits which do not depend on NIC include:

Benefits Class 1 Class 2 Class 3
Maternity Allowance Yes Yes No
Contribution-based Jobseeker's Allowance Yes No No
Incapacity Benefit Yes Yes No
Employment and Support Allowance Yes Yes No
Widow's Benefits Yes Yes Yes
Basic State Pension Yes Yes Yes
State Second Pension Yes No No



 

7. Frequently Asked Questions

What if I have more than one job?

Unless you are a director of a company, each employment you have is looked at separately and each has the weekly £166 lower limit primary threshold.

If, in the 2019/20 tax year you have two jobs, you may be able to defer paying Class 1 national insurance contributions.  You can find out more about the conditions for this on the Gov.uk website. You do this on form CA72A 'Application for deferment of payment of class 1 NICs' available on the Gov.UK website(link opens in a new window) .

If you need them, there are Guidance notes for form CA72A that you can download from the HMRC website at the link above.

What happens if I am employed and self-employed?

If you are both employed and self-employed, you need to pay both Class 1 NIC on your employed income and Class 2/4 NIC on your self-employed income.  Class 2 is now paid at the same time as Class 4 when you file your self-assessment tax return.  How much you pay depends on your combined income from all your jobs.  HMRC will let you know how much Class 2 and Class 4 is due after you've filed your self-assessment tax return.  If you pay the maximum amount of annual NIC by way of Class 1/Class 2 you may not need to pay any more.

 

Reviewed: April 2019