National Insurance (NI)

National Insurance (NI) is a contribution paid to HMRC by employees, their employers, and the self-employed. The purpose of National Insurance is to qualify people for certain provided benefits such as the State Pension.

Who pays National Insurance?

You’ll pay the tax if you’re 16 or over and are either:

  • In employment and are earning above £242 a week
  • Self-employed and making a profit of £6,725+  a year (from 6 April 2024, you only have to pay Class 4)

Employers also pay National Insurance for their employees who earn over £242 per week. Once you reach the state pension age, you don’t need to pay NI at all.

Different taxpayers pay different kinds of National Insurance, known as different ‘classes’. The rates depend on whether you are self-employed, an employee of a company or an employer. We have dedicated a glossary page to each class of National Insurance. Below, we’ve listed the various classes and who they apply to, so you can look at your own class in more detail!

  • Class 1 – Paid by employees earning over £242 per week and who are under the State Pension age.
  • Class 1A or 1B – Paid by employers on top of their employees contributions
  • Class 2 – Paid by self-employed individuals earning over £6,725 per year
  • Class 3 – Voluntary contributions to fill in gaps in your NI record to help you qualify for future benefits such as Maternity Leave and State Pensions
  • Class 4 – Paid by self-employed individuals earning over £12,570 per year.

If you’re employed then National Insurance will be automatically deducted from your monthly pay. However, if you’re self-employed, then you need to pay these contributions yourself. This is usually done through your Self Assessment tax return.

Whether you’re employed or self-employed, it’s important to make sure that you have the right tax code, so that you’re not underpaying or overpaying NI and Income Tax.

Frequently Asked Questions

  • Is National Insurance mandatory?

    National Insurance is mandatory. If you are employed and pay your tax via PAYE, your National Insurance contributions will also be deducted automatically from your wages. If you are self-employed, it’s important to make sure you have the right tax code to ensure that you are paying the correct National Insurance via your Self Assessment tax return.

  • Can you help me to organise my accounts as a self-employed person?

    We understand that first starting out in the world of self-employment can be overwhelming. Contact our team today for comprehensive guidance and support to get your accounts in order and ready for your Self Assessment tax return.

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