National insurance contributions (NIC) - What are national insurance contributions (NIC)?
National insurance is a tax on your earnings. This guide covers some basic information about NIC.
- Last reviewed 18 September 2023
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.
Employees pay Class 1 national insurance contributions of 12% on earnings above the £242 per week primary threshold. You will only pay contributions of 2% on any earnings over £967 per week.
If your income falls below the primary threshold, you will not need to pay any contributions. If your income is between £123 (the lower earnings limit) and £242 per week, then you will be treated as if you had made national insurance contributions, even though you don't pay any.
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.
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 (HMRC) website
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 - £6,725 - 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.
If you are employed but have been earning less than £123 per week, you can also choose to pay voluntary contributions to protect your pension entitlement. You should check your benefit entitlement first to see if you could be getting National Insurance Credits (see below) instead.
National Insurance Credits
National Insurance Credits may be available if you are unable to make National Insurance Contributions. You'll either get them automatically or you'll have to apply for them.
Different types of National Insurance Credits safeguard your entitlement to different benefits.
Check the National Insurance Credits page of the government website to check when you are eligible for national insurance credits, which benefits they cover and how to apply for them.