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National Insurance

What is it?

National Insurance (NI) is a tax that's intended to fund social benefits, primarily the state pension and unemployment benefit ('jobseeker's allowance'). Your entitlement to such benefits is usually dependent on your history of NI contributions.

If you're an employee it's deducted via PAYE while the self-employed pay a weekly contribution and a profits-based contribution alongside income tax.

Prior to PAYE, it was necessary to purchase a NI certificate or 'stamp', hence some people referring to NI as 'paying their stamp'.

Who pays NI?

Anyone working in the UK aged between 16 and state pension age. If you're a foreigner working in the UK and paying NI in another European Economic Area (EEA) country you may be exempt provided you can produce a certificate confirming your ongoing contributions in that country.

Those living in the UK receive a NI Number of their 16th birthday, this number is used to track their NI contributions over their working life.

How much do I pay?

This depends on how much you earn and which class(es) of NI you have to pay:

Class 1Class 2Class 3Class 4

Paid by both employees and their employer on earnings over a weekly 'primary threshold' of £155. The NI rate for employees reduces on earnings above an 'upper earnings limit' of £827.

On earnings between a weekly 'lower earnings limit' of £112 and the primary threshold, no NI contributions are paid, but are credited by the Government as if they were, helping those on low incomes.

These count towards the State Pension, contribution-based Jobseeker’s Allowance, Incapacity Benefit, Bereavement Benefits and Maternity Allowance.

Current UK National Insurance bands and rates are:

National Insurance Class Band Rate
Class 1 (employee) £155 - £827 per week 12%
Class 1 (employee) over £827 per week 2%
Class 1 (employer) over £155 per week 13.8%
Class 2 over £5,965 £2.80 per week
Class 3 n/a £14.10 per week
Class 4 £8,060 - £43,000 9%
Class 4 over £43,000 2%

What if I can't work?

If you're unemployed, incapable of working, on an approved training course or receiving a maternity or carers allowance, you might be eligible for Class 1 credits. These maintain your state pension record and may maintain your entitlement to other benefits such as incapacity benefit.

You can get automatic NI credits for up to five full tax years from the tax year in which you reach age 60, provided you are not paying any NI contributions and are:

  • a man between the age of 60 to 65
  • a woman born after 5 April 1950 and aged between 60 and 65

Entitlement to benefits

State PensionJobseeker’s AllowanceEmployment & Support AllowanceBereavement

You need 30 qualifying years of NI contributions to receive a full basic State Pension.

If you don't build up sufficient qualifying years you could consider making Class 3 contributions to 'catch up'. Provided you have at least 10 qualifying years of you should be eligible for the minimum basic State Pension (25% of the full pension).

The full basic State Pension is currently £155.65 per week.

National Insurance Jargon

Here's some of the more common national insurance jargon you might come across:

Class 1Compulsory National Insurance contributions paid by employees and employers.
Class 2Complusory National Insurance contributions paid by the self-employed at a flat weekly rate.
Class 3Voluntary National Insurance contributions paid by those with gaps in their contribution history.
Class 4Compulsory National Insurance contributions paid by the sef-employed on their profits.
National InsuranceA type of tax that is intended to fund social benefits, primarily the state pension and unemployment benefit.
Paying StampA phrase used by some people that refers to paying National Insurance (prior to PAYE it was necessary to purchase 'stamps').