You pay National Insurance contributions in order to qualify for a number of state benefits such as the State Pension. There are different classes of National Insurance dependant on your employment status and how much you earn. Tax and National Insurance is recorded against your name only and the Government keeps this record by issuing people a National Insurance number. You can find your National Insurance number on your payslip, your P60 and on letters about your tax, pension or benefits.
Who pays National Insurance? Well, anybody aged 16 or over and either:
– an employee earning above £166 a week
– self-employed and making profit of £6,365 or more per year
If you earn between £118 – £166 per week, your contributions are treated as having been paid to protect your National Insurance record.
If you are employed, you stop paying Class 1 National Insurance when you reach the State Pension age. If you are self-employed you stop paying Class 2 National Insurance when you reach State Pension age and Class 4 National Insurance from 6 April after you reach State Pension age.
National Insurance Classes
How much will I pay?
The amount of National Insurance you pay is dependant on your employment status and how much you earn.
If your are employed, you pay Class 1 National Insurance contributions and the rates for most people for 2019 to 2020 tax year are:
If you are self-employed, depending on your profits you pay Class 2 and Class 4 National Insurance which most people pay through Self-Assessment. To work out your self-employed profits, you deduct your expenses from your self-employed income. The rates for most people for the 2019 to 2020 tax year are:
Some people can experience gaps in their National Insurance record meaning they may not have enough years of National Insurance contributions to get the full State Pension (these are also know as ‘qualifying years’). One solution to this and providing that you are eligible, you may be able to pay Voluntary Contributions to fill any gaps in your record.
Reasons for these gaps could be due to a number of scenarios such as:
– a period of time in which an individual lived abroad
– unemployed and not claiming benefits
– self-employed but did not pay contributions due to small profits
– low earnings during employment
If you think there could be a chance you have gaps in your National Insurance record, you can visit the Direct Governments website here to check your record. This will provide personal details regarding any gaps, your eligibility and how much it would cost you.
It is highly recommended to seek financial advice before you commit to making any additional voluntary contributions.
What are National Insurance contributions used for?
National Insurance contributions with the exception of Class 4 contributions are counted towards the following state benefits: