UK National Insurance Contributions

National Insurance contributions (NICs) are paid to build up a person's entitlement to certain state benefits, including the State Retirement Pension. The amount that an individual is liable to pay depends on their own personal circumstances.

Who pays National Insurance?

National Insurance is payable by all UK individuals aged over 16 that are either employed or self-employed and their earning are above a certain level. If you are an employee and reach the state retirement age you are no longer required to make NICs. Similarly if you are self-employed and reach the state retirement age you immediately are no longer required to make class 2 NICs, and from the tax year following the year you reached the state retirement age you are no longer required to make class 4 contributions.

The various classes of National Insurance contributions are detailed below:

Class 1 - paid by employees, sometimes politicians have referred to this as "an employment tax" or 53000 After Tax. Two elements to class 1 contributions which are employee's contributions are deducted from an employees pay. Employer's contributions are paid by employers when they pay employees.

Class 2 - this paid by self employed people. It is a flat rate regardless of earning (provided that the self-employed person has earning over a certain level, if earnings are lower than this level then a "small earning exemption" may be applied for). These are normally paid either quarterly via a bill from HMRC or monthly by direct debit.

Class 3 - These are voluntary National Insurance Contributions, in certain circumstances some people may wish to make these. For example, but not limited to, you have not made sufficient contributions in the year or perhaps you are living abroad but want to maintain your potential UK state benefits. It is highly recommended that you speak to an experienced professional prior to making such contributions.

Class 4 - These are payable by self-employed people in addition to Class 2 contributions, if their income is above a certain level. The level of these contributions are dependent on earnings. Class 4 National Insurance contributions are normally payable with income tax calculated on an individual's Self-assessment tax return.

If you have any concerns about your National Insurance payments or record we suggest you contact a suitably qualified and experienced professional such as a Chartered Accountant.

The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice.