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If you work for an employer, then you’ve probably seen a deduction on your payslip labelled with the letters NI. It stands for National Insurance, and the amount you pay depends on how much you earn.

You’ll also pay NI on any income that you earn working for yourself, so keep that in mind at Self Assessment time! We’re here to help with all of your accounting and bookkeeping needs, so take a look at our quick start guide to NI.

What is National Insurance (NI)?

Workers make National Insurance Contributions (NICs) to be eligible for a state pension and some types of benefits. If you work for an employer, then they also have to make contributions to your NI (which comes out of their pocket, not yours – hurrah!).

To make sure that your National Insurance Contributions are recorded correctly, each person has their own unique NI number.

Check how much National Insurance you will pay as an employee, employer, or self-employed person.

You might also find it useful to watch our video about National Insurance and income tax for self-employed people.

 

 

 

What happens if I have gaps in my NI record?

The National Insurance contributions you make go towards your State Pension plus any other benefits. If you have gaps in your NI record, it can affect how much State Pension you get. Don’t worry, you can check your record here, and you can even make voluntary contributions to fill in any gaps.

How do I pay National Insurance (NI)?

The way that you pay NI depends on your employment status (whether you’re employed or self-employed).

Paying NI when you’re employed

If you are employed, it’s your employer’s responsibility to calculate how much NI to deduct each time they pay you. They pay this to HMRC on your behalf, and will show the amount deducted on your payslip.

Paying NI when you’re self-employed

Self-employed workers submit a Self Assessment tax return directly to HMRC, who use it to calculate how much income tax and NI is due. It’s then up to you to make sure this gets paid to HMRC by the deadline (but HMRC do give you options of how to pay).

Paying NI when you’re employed and self-employed

Some people work for an employer and run a business in their spare time. The person you work for will collect the NI due on what you earn from them, and pay it to HMRC on your behalf.

It’s up to you to complete a Self Assessment tax return to tell HMRC about money earned working for yourself. They will use that information to calculate how much tax and NI you must pay, and will give you options on how to pay it before the deadline.

What are the different National Insurance (NI) classes?

The different types of NI, known as classes, categorise the type of work you do, and how much you earn doing it.

 

Class 1 National Insurance Class 1 NI is for employees who are 16 or over, and under State Pension age, and earning more than the Primary Threshold. Employers deduct NI on behalf of their staff, and pay it on to HMRC.
Class 1A or 1B National Insurance Employers pay these contributions on their employee’s expenses or benefits
Class 2 National Insurance Class 2 NICs are for self-employed people. They are compulsory if your self-employed income is at the Lower Profits Limit (LPL) or higher.
Class 3 National Insurance This type of NI is for making voluntary contributions. For example, if you have gaps in your record that you’d like to fill.
Class 4 National Insurance Class 4 NI is compulsory for self-employed people whose self-employed profits earn them more than the Upper Profits Limit (UPL).

 

If you are self-employed and would like online accountancy help call 020 3355 4047, or get an instant quote.

About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

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