What is National Insurance?
National Insurance is a type of tax where UK workers (whether employed or self-employed) pay into a ‘pot’ which then entitles them to claim certain state benefits such as:
- Unemployment benefits
- Statutory sick pay
- Maternity pay
- State pension
- NHS
In most cases you’ll start paying national insurance once:
- your employment earnings are above £166 a week
- your self-employment profits are more than £6,365 a year
It is also referred to as ‘NI’ (national insurance) or Social Security and is payable by UK workers 16 and over. You stop paying it once you reach the State Pension Age.
The government track how much national insurance you have contributed by your national insurance number.
National Insurance Classes
There are four different types of NI classes. The class you belong to depends on your personal status.
You’ll pay a different rate of
National Insurance Contributions (NICs) are deducted by your employer each time you are paid. Or, if you are self-employed, once a year when you submit your self-assessment tax return.
National Insurance Categories
Your national insurance category indicates your personal status and shows how much you should be contributing.
Most people are given category ‘A’ but there are others:
| Category Letter | |
|---|---|
| A | Standard category and default for anyone who doesn't fit in another letter |
| B | Married women and widows entitled to pay reduced NI |
| C | Employees over the state pension age |
| J | Employees who defer NI contributions because they already pay the maximum in another job |
| H | Apprentices under 25 |
| M | Employees under 21 |
| Z | Employees under 21 who can defer National Insurance because they’re already paying it in another job |
| X | Under 16s who do not have to pay NI |
New Here? These are my most popular resources:
- The Ultimate Bookkeeping Spreadsheet – Organise your money, track the numbers that matter and stay on top of your cash;
- FREE Guide: 11 Common Small Business Setup and Tax Mistakes – Are you worried your business isn’t set up correctly? Use this guide to identify whether you’re making the 11 most common financial pitfalls I’ve seen when it comes to setting up a business and taxes, as well as finding out how you can put them right;
- Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
- FREE Business Expenses Cheatsheet – Check what you can and can’t claim as an expense against your taxes.
- 6 Core Elements of Self-Employment Taxes – Confused by taxes? Worried you’re missing something when it comes to tax allowances and reliefs? These easy to follow 6 mini-guides will have you on top of the tax side of things in no time at all.
