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National insurance contributions (NIC) - What are national insurance contributions (NIC)?

Find out more about National insurance contributions (NIC).

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 £157 per week  primary threshold.  You pay an extra 2% on earnings above the upper earnings limit of £866pw. 

If your income falls below the primary threshold, you will not need to pay any contributions.  If your income is between £113 (the lower earnings limit) and £157 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 - £6,025 - you will 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. 

 

Reviewed: August 2017

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