What is National Insurance?
Are you confused by how much National Insurance contributions you have to pay? Or what category you fall into? HMRC’s National Insurance is a type of tax where UK workers, whether employed or self-employed, pay into a ‘pot’. This 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.
| Class | Who Pays |
|---|---|
| 1 | Employees earning more than £166 a week and under State Pension age (automatically deducted through payroll) |
| 1a | Employers pay these on employee’s expenses or benefits |
| 2 | Self-employed people earning business profits of more than £6,365 a tax year (but you can choose to pay voluntary contributions) |
| 3 | Voluntary contributions to fill or avoid gaps in your National Insurance record |
| 4 | Self-employed people earning business profits over £8,632 a year |
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.
You may pay more than one class depending on how you earn your money and from which sources.
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 |
