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National Insurance is a type of tax you pay on money you earn from an employer, pay to an employee, or profits you make from self-employment. Making National Insurance contributions helps taxpayers qualify for certain benefits, such as the State Pension.
 

How does National Insurance work?

How do I pay National Insurance?

How much NI do I have to pay?

When will I stop paying National Insurance?

Do I need a National Insurance number?

What happens if I lose my NI number?

You’ll start making National Insurance contributions if you’re 16 or over, and your employment earnings or self-employed profits reach the income threshold. Employers also make National Insurance contributions on employee wages above the payment threshold.

The rate that you pay and the threshold at which you start making contributions is determined by:

Employers make National Insurance contributions through PAYE. If you work for an employer, they will deduct any National Insurance contributions you owe from your wages each time they pay you, and then send it on to HMRC through the PAYE system. The deductions they take will be shown on your payslip, along with the amount they contribute.

Self-employed people make National Insurance contributions based on the profits they report on their Self Assessment tax return, and pay what they owe at the same time as paying their tax bill. Some people can also use a CA5601 form to request permission to pay their National Insurance contributions by direct debit.
 

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The amount of National Insurance you have to pay depends on your income, and how you earn it. The different types of National Insurance are known as ‘classes’, and they each have their own thresholds (the point at which you start paying) and rates (the amount that you pay).

Different types of National Insurance

Class 1 (Primary) What employees pay on wages earned from an employer
Class 1 (Secondary) Employers’ contributions towards employees’ National Insurance
Class 1A or 1B Additional National Insurance contributions employers must make if they provide benefits to employees, (sometimes known as Benefits in Kind, or BiKs)
Class 2 Self-employed people pay this on profits earned from doing business. This type of NI will be abolished from April 2024.
Class 3 Voluntary contributions you can make in order to top up the amount of NI you paid in a tax year
Class 4 Payable by self-employed people on the profits they make

 

What if I earn less than the threshold?

This normally means that you won’t need to make National Insurance contributions. If you’re self-employed and have profits between the Small Profits Threshold and Lower Profits Threshold, you’ll continue to earn National Insurance ‘credits’. This means you’ll continue to accrue benefits and be entitled to the State Pension, even though you won’t make actual payments.

What if I stop working?

If you’re a carer or too ill to work, you may be eligible for National Insurance credits so that you don’t have gaps in your NI record. This means that the amount of pension or benefits you can access won’t be affected.

If you are unable to claim National Insurance credits, you may decide you want to pay voluntary National Insurance Contributions instead.

Can I reclaim National Insurance if I pay too much?

Yes! Like all taxes, you can claim a refund if you overpay. Use HMRC’s online tool to claim a National Insurance refund.

You’ll pay National Insurance on earnings above the NI threshold from the age of 16 until you reach state retirement age.

What if I carry on working when I reach state pension age?

You won’t make National Insurance contributions once you reach state pension age, even if you continue working – although you will pay income tax if any is due.

If you reach state pension age during a tax year and you’re self-employed then your Class 4 contributions will continue until the end of the tax year.

You’ll need a National Insurance number to work in the UK, even if you work for yourself. This is a unique reference number which helps HMRC keep track of the contributions you make towards your National Insurance record.

How do I get a National Insurance number?

If you were born in the UK, you will usually be sent your National Insurance number just before your 16th birthday.

You can also apply online for a National Insurance number, but you may need to prove you have the right to work. For example, if you enter the UK on a visa you will need to show that it gives you the right to work as well as entry.

You can apply for a National Insurance number even if you do not have a job lined up.

 
Up until 1984, a person was sent their National Insurance number on a notification card, similar to a postcard. From 1984 until 2011, this was sent as a plastic card, similar to a debit or credit card. These days your National Insurance number will sent to you in a confirmation letter.

What does a National Insurance number look like?

A National Insurance number consists of two letters, followed by six digits, and then one letter, e.g. AB 12 34 56 C

Although the first two letters and the six digits of a National Insurance number are unique to each individual, the last letter will be either A, B, C or D. Your National Insurance number will never change, whether you get married, change your name, or go abroad to live.

You’ll usually be able to find your National Insurance number on any payslips or tax documents you have, such as a P45 or P60. You can also view your NI number online using your Personal Tax Account.

If you don’t have access to any of these, contact HMRC so they can resend it to you.
 
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About The Author

Beth-Anne Bruce

I'm an experienced and fully AAT and ACCA qualified accountant, who is enthusiastic about helping business owners succeed. I also love cooking and needlepoint (at different times!). Learn more about Beth.

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